Soochow Securities: Gives Yanghe shares a buy rating

2021-10-28He Changtian of Soochow Securities Co., Ltd. conducted a study on Yanghe shares and released a research report "2021 Third Quarter Report Review: Significant Reform Results, Product Continuous Upgrading", this report gave a buy rating to Yanghe Shares, and the current stock price is 186.15 yuan.

Yanghe Shares (002304)

Event: On October 26, 2021, Yanghe Co., Ltd. released the third quarter report of 2021, achieving operating income of 6.399 billion yuan in Q3 2021, an increase of 16.66%, and the net profit attributable to the mother in Q3 was 1.551 billion yuan, down 13.10% year-on-year; and the net profit deducted from non-attributable to the mother was 1.682 billion yuan, an increase of 22.95% year-on-year.

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The net profit of deduction of non-attributable mothers maintained a high growth rate, highlighting the effectiveness of system reform. In Q3 2021, the operating income was 6.399 billion yuan, an increase of 16.66% year-on-year, and the net profit of non-attributable to the mother was 1.682 billion yuan, an increase of 22.95% year-on-year. In terms of cash flow, the net cash flow generated by operations reached 3.381 billion yuan, an increase of 47.68% year-on-year. Q3 company gross profit margin of 76.15%, an increase of 3pct year-on-year; in terms of expenses, sales and management expense ratios were 13.48%, 6.64%, respectively, down 4.48pct and 1.57pct year-on-year. The effect of the internal reform is obvious, the net profit after deduction of non-attributable net profit, the growth rate of operating cash flow is higher, and the overall expense ratio is significantly reduced; the market value of the stock held by BOC Securities in Q3 fell by 27% and the fair value loss was about 440 million yuan (the net gain on the change in fair value in Q3 2020 was about 330 million yuan), and the net profit margin decreased by 8.3pct year-on-year to 24.27%.

The national payment collection plan was reached, and the product structure continued to upgrade. At present, the national payment collection plan has been reached, and the market feedback for the upgrading of the 2021Q3 Dream 6+, Dream 3 Crystal Edition, and the new version of Sky Blue product upgrades is good, and the growth rate of Dream 6+ remains expected. After the upgrade, the price of the product is stable, the acceptance of consumers is improved, and the inventory is within a reasonable range. In general, after the upgrade of Yanghe, the product structure has been optimized to help the company's national development, and we expect the company's 2021 goal to be completed.

Channel adjustment releases vitality, and the annual over-completion of the target can be expected. Since the reform, the company has steadily promoted the progress of investment promotion, continued to carry out channel reform, optimized the dealer system, and the inventory level of dealers and terminals is within a reasonable range. After the 2019 Dream 6+ revision, it successfully led the consumer price belt in the province to move, the crystal version of the dream 3 was listed for about a year and the channel acceptance was rising, and the second half of this year is expected to exert force after the revision of Sky Blue, the ocean blue series this year's channel profit expansion, the enthusiasm of dealers is high, the sales situation is better, the market confidence is significantly strengthened, and the reform dividend continues to be released, and we believe that the company is expected to exceed the annual growth target.

Earnings Forecast and Investment Rating: As of Q3 2021, the company's overall growth for the current year is in line with expectations, so we maintain our previous profit forecast, expecting the company to achieve revenue of 24.266/286.34/33.788 billion yuan in 2021-2023, a growth rate of 15.0%/18.0%/18.0%, and a net profit attributable to the mother of 7.849/94.41/11.337 billion yuan, a growth rate of 4.9%/20.3%/20.1%, and EPS 5.21/ 6.26/7.52 yuan, the current stock price corresponding to PE is 34/29/24X, maintaining a "buy" rating.

Risk Warning: Macroeconomic fluctuations, demand is less than expected, channel adjustment is not as expected.

A total of 35 institutions have given ratings in the last 90 days, 30 buy ratings and 5 overweight ratings; the average target price of institutions in the past 90 days is 226.21; the Valuation Analysis Tool of Securities Star shows that Yanghe Shares (002304) has a good company rating of 3.5 stars, a good price rating of 3 stars, and a valuation comprehensive rating of 3 stars.