Dongguan Securities: Gave Yanghe shares a buy rating

2021-10-27Wei Hongmei of Dongguan Securities Co., Ltd. conducted a study on Yanghe shares and released a research report "2021 third quarter performance review: Q3 performance in line with expectations, reform results gradually show", this report gives a buy rating to Yanghe shares, the current stock price is 180.35 yuan.

Yanghe Shares (002304)

Event: The Company released its third quarter report for 2021. In the first three quarters of 2021, the company achieved operating income of 21.942 billion yuan, an increase of 16.01% year-on-year; realized a net profit attributable to the mother of 7.213 billion yuan, an increase of 0.37% year-on-year; and achieved a net profit of 6.850 billion yuan, an increase of 21.57% year-on-year. In the third quarter of the single quarter, the operating income was 6.399 billion yuan, an increase of 16.66% year-on-year; the net profit attributable to the mother was 1.551 billion yuan, down 13.10% year-on-year; and the net profit deducted from the non-attributable mother was 1.682 billion yuan, an increase of 22.95% year-on-year.

Comments:

The Q3 performance is in line with market expectations, and the company's business objectives are expected to exceed the quota. The company achieved operating income of 6.399 billion yuan in 2021Q3, an increase of 16.66% year-on-year; realized a net profit attributable to the mother of 1.551 billion yuan, down 13.10% year-on-year; and realized a net profit of 1.682 billion yuan, an increase of 22.95% year-on-year. The company's revenue in the third quarter achieved steady growth, and the decline in revenue growth rate was mainly due to the company's low base factors in the second half of last year. Due to the company's Q3 had a non-operating expense of 0.18 billion yuan and a net loss of fair value change of 372 million yuan, which dragged down the company's Q3 attributable net profit by 13.10% year-on-year. Excluding the impact of unless recurring gains and losses, the company's non-attributable net profit in the third quarter of this year increased by 22.95% year-on-year. The overall performance is in line with market expectations. Previously, the company proposed to strive to achieve an increase of more than 10% in operating income by more than 10% in 2021, and the operating goal was relatively stable. As of 2021Q3, the company's operating income has reached 94.53% of the annual target. Entering the peak season of liquor sales in the fourth quarter and the stocking effect of the Spring Festival, it is expected that the company's business objectives are expected to exceed the quota.

Continuous optimization of product structure, channel reform effect appears. Since the second half of 2019, the company has successively reformed products, channels, etc., and the reform results have gradually emerged. By product, the company's product upgrade iteration process is ideal. After upgrading the M6+, M3 crystal version and sky blue, the company will further promote the structural optimization of products such as sea blue and double groove. From the perspective of sub-channels, the company has carried out marketing adjustment and transformation since 2019, implemented the channel reform development strategy of "one business as the mainstay, and multiple businesses cooperated", and gradually cleaned up and optimized the dealer structure. Judging from the current situation, the channel has naturally come to an end. The company's current channel profit margin is relatively considerable, M6+, M3 crystal version, Sky Blue dealer profit margin is about 6%, terminal profit margin of more than 6.5%. Compared with before the reform, the company's channel profit margin has improved significantly.

Q3 Gross profit margin increased, expense control is better. In 2021Q3, the company achieved a gross profit margin of 76.15%, an increase of 2.99 percentage points year-on-year, mainly due to the upgrading and optimization of the product structure. From the expense side, the company's expense control is better, the sales expense ratio of Q3 is 13.48%, down 4.48 percentage points year-on-year; the management expense ratio is 7.15%, down 3.61 percentage points year-on-year; the financial expense ratio is -0.39%, down 0.18 percentage points year-on-year. Affected by changes in fair value and non-operating expenses, the company's Q3 net profit margin was 24.27%, down 8.31 percentage points year-on-year.

Maintain recommended ratings. It is expected that the company's EPS in 2021-2022 will be 5.48 yuan and 6.61 yuan, respectively, corresponding to PE 32.91 times and 27.30 times, respectively. The company previously appointed Comrade Zhang Liandong to preside over the overall work of the company, and it is expected that the work adjustment will effectively improve the overall operational efficiency of the company. In addition, on July 15, the company released the first phase of the core backbone shareholding plan (draft), and the performance appraisal target is that the operating income in 2021 will increase by no less than 15% compared with 2020. With the steady progress of product structure upgrading and reform adjustment, it is expected that the company's performance will have greater growth flexibility. Maintain a "recommended" rating for the company.

Risk Warning. Product upgrades are less than expected, channel expansion is not as expected, food safety risks, and industry competition is intensifying.

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.