Huaxi Securities: Give Yanghe shares a buy rating

2021-10-27Huaxi Securities Co., Ltd. Kou Xing conducted a study on Yanghe shares and released a research report "Stable revenue growth, structural improvement shows growth potential space", this report gives a buy rating to Yanghe shares, the current stock price is 178.5 yuan.

Yanghe Shares (002304)

Event overview

2021Q1-Q3 achieved revenue of 21.942 billion yuan, +16.01% year-on-year; net profit attributable to the mother of 7.213 billion yuan, a year-on-year increase of +0.37%; net profit of non-attributable parent of 6.850 billion yuan, a year-on-year increase of +21.57%; contract liabilities of 6.410 billion yuan, a year-on-year +65.67%; net cash flow from operating activities of 5.474 billion yuan, compared with -444 million yuan in the same period last year. Among them, in 2021Q3, the revenue was 6.399 billion yuan, a year-on-year increase of +16.66%; the net profit attributable to the mother was 1.551 billion yuan, a year-on-year -13.10%; and the net profit of non-attributable to the mother was 1.682 billion yuan, a year-on-year increase of +22.95%. Revenue slightly exceeded expectations.

Analytical decisions:

Q3 revenue achieved steady growth, and the overall performance slightly exceeded market expectations

21Q3 total operating income +27.39% q-o-q, the third quarter revenue growth rate, exceeding market expectations. 21Q1-Q3 contract liabilities + other current liabilities of 6.607 billion yuan, a year-on-year increase of +67.84%; 21Q3 contract liabilities + other current liabilities of 1.004 billion yuan, the same period last year -0.11 billion yuan. 21Q1-Q3 sales received 22.814 billion yuan, +66.43% year-on-year; 21Q3 sales received 8.031 billion yuan, +40.63% year-on-year, +50.10% month-on-month. Net cash flow from operating activities was $5.474 billion in 21Q1-Q3, compared to $444 million in the same period last year; net cash flow from operating activities in 21Q3 was $3.381 billion, +47.68% year-on-year. Income accelerated the increase in advance receipts, sales receipts and cash flow from operating activities increased.

The decline in performance was mainly due to changes in fair value and investment income

21Q1-Q3 gross margin of 74.93%, +1.73pct; 21Q3 gross margin of 76.15%, year-on-year +2.98pct, we judge that the gross margin improvement is mainly due to the good performance of M6+ and the upgrading of product structure.

21Q1-Q3 tax and surcharge/operating income was 16.61%, +1.62pct year-on-year; 21Q3 tax and surcharge/operating income was 18.89%, 5.72pct year-on-year. 21Q1-Q3 sales expense ratio/management expense ratio/financial expense ratio was 10.04%/6.18%/-0.58%, respectively, -1.42/-0.97/-0.32pct, respectively; 21Q3 sales expense ratio/management expense ratio/financial expense ratio was 13.48%/6.64%/-0.39%, respectively, and -4.49/-1.56/-0.18pct, respectively, and the expense rate during the superimposed tax and additional change period was basically flat.

21Q1-Q3 investment income was 763 million yuan, -17.01% year-on-year, and fair value was -278 million yuan, compared with 1.247 billion yuan in the same period last year. 21Q3 Company's investment income was 220 million yuan, -8.65% year-on-year; fair value was -372 million yuan, compared with 326 million yuan in the same period last year. Fair value decrease is primarily due to a decrease in gains on changes in fair value generated by trading financial assets. Affected by changes in investment income and fair value, 21Q1-Q3 net interest rate after deduction was 32.90%/31.22%, year-on-year -5.11/+1.43pct; 21Q3 net interest rate/net interest rate after deduction was 24.27%/26.29%, year-on-year -8.30/+1.34cpt.

The vitality of the original market has been restored, and the structural improvement shows the potential for growth

In August this year, the company resolved to pass the core backbone stock ownership plan, which covers a wide area, has reasonable incentives and assessment goals, and comprehensively promotes the release of organizational momentum. The upgrading of Sky Blue has been basically completed, which has effectively improved the profit margin of the product channel in a short period of time, and restored the channel momentum of Sky Blue to a certain extent. Driven by the strong growth of M6+, the Dream Blue series has ushered in a gratifying growth performance, which is expected

M6+ doubled its growth throughout the year, greatly improving the product structure of Yanghe.

2021 is the year of breaking the situation on the road of Yanghe's sub-high-end nationalization. For Yanghe, brand genes, channel layout, team quality and other aspects of the foundation is very balanced, in this wave of high-end high-speed expansion, it is supposed to eat more dividends, the current explosive growth of M6+ products should be the expected performance, it is expected that M6+ will be in the sub-high-end price in the sea, Tianzhi follow-up to write a new chapter of Yanghe's nationalization. In the future, we should pay close attention to the market performance of Yanghe in the surrounding markets of Jiangsu (such as Shandong, Henan, Zhejiang, etc.), and the turning point may come earlier than we expected.

Investment advice

Maintaining the profit forecast unchanged, we expect the company to achieve operating income of 23.754/267.30/29.994 billion yuan, +12.6%/+12.5%/+12.2% year-on-year, and net profit attributable to the mother of 8.365/93.06/10.359 billion yuan, +11.8%/+11.3%/+11.3% year-on-year; EPS is 5.55/6.18/6.87%, respectively. The closing price of 180.44 yuan on October 26, 2021 corresponds to a valuation of 32.51/29.22/26.25 times, respectively. Maintain a "Buy" rating.

Risk Warning

The economic downturn has led to weaker demand; incentive plans have not passed the shareholders' meeting; food safety issues.

A total of 33 institutions have given ratings in the last 90 days, with 28 buy ratings and 5 overweight ratings; the average target price of institutions in the past 90 days has been 223.19; the Valuation Analysis Tool of Securities Star shows that Yanghe Shares (002304) good company rating is 3.5 stars, good price rating is 3 stars, and valuation comprehensive rating is 3 stars.