Tsingtao Beer (600600) continues to promote structural upgrading

Southwest Securities Zhu Huizhen

Tsingtao Beer achieved revenue of 26.77 billion yuan in the third quarter of 2021, an increase of 9.6% year-on-year; Achieved a net profit attributable to the mother of 3.61 billion yuan, an increase of 21.3% year-on-year. Among them, 2021Q3 achieved revenue of 8.48 billion yuan, down 3% year-on-year, and achieved a net profit attributable to the mother of 1.2 billion yuan, an increase of 6.4% year-on-year, and the performance of Q3 was in line with expectations.

Sales are under obvious short-term pressure

In the first three quarters, the company achieved beer sales of 7.082 million tons, an increase of 2% year-on-year, of which the Q3 single quarter achieved sales of 2.312 million tons, down 8.8% year-on-year, subject to more rain this summer, less high temperature weather, and scattered epidemics caused by frequent damage to the spot drink channel, the company's sales short-term pressure is obvious. In terms of grades, Qingdao's main brand achieved sales of 3.784 million tons, an increase of 13.1% year-on-year; Other brands achieved sales of 3.298 million tons, down 8.3% year-on-year. The product structure upgrade trend continued, and the proportion of sales of the main brand increased by 5.2pp to 53.4% year-on-year, driving the company's overall tonnage price to rise by 7.5% to 3780 yuan / ton. By product, high-end new whole wheat white beer continues its rapid growth trend, and sales are expected to exceed 150,000 tons in 2021; The growth rate of Qingdao Chunsheng in the third quarter fell slightly from the previous quarter, and the annual sales volume is expected to remain above 1 million tons. The momentum of high-end new products continues to be released, and the upgrading of superimposed low-end products performs well, and the company's profitability may still be greatly improved.

Profitability improved slightly

The gross profit margin of the company in 2021Q3 was 43.7%, up 1.7pp year-on-year, of which the gross profit margin of Q3 was 42.1% in the single quarter, down 0.3pp year-on-year. On the one hand, the price of raw materials such as barley and packaging materials continues to rise, and in addition, the decline in sales has led to a reduction in fixed cost dilution, and the cost side is under obvious pressure; On the other hand, the proportion of high-end beer sales continued to rise, and high-margin products opened up the company's profit margins. In terms of expense ratio, the company actively controlled the cost of investment, streamlined channel expenses, and the sales expense ratio decreased by 0.1pp to 16.8% year-on-year; The management expense ratio increased by 0.5pp to 4.2% year-on-year. The product structure continued to upgrade, driving the company's overall net profit margin to increase by 1.1pp to 13.9%.

The high-end transformation smoothly guarantees long-term performance

1) Due to the continuous high price of raw materials, major beer companies have raised prices. Industry price increases are about to reappear, which will help the company alleviate the pressure on the cost side and further improve profitability. 2) The company steadily promotes the upgrading of product structure, under the huge sales base in the northern region, the upgrade from low-end brands to mid-end classics and Laoshan is smooth, and the superimposed high-end beer market is selling well, and the smooth upgrading of product structure will release a lot of performance flexibility for the company. 3) Capacity optimization continues to be carried out, reducing unit production costs while pulling the canning rate to continuously improve, escorting the stable growth of the company's long-term performance.

Investment advice

It is expected that the EPS for 2021-2023 will be 2.14 yuan, 2.62 yuan and 3.13 yuan respectively, corresponding to 49 times, 40 times and 33 times for dynamic PE, respectively, maintaining the "buy" rating.

Risk Warning: The risk of raw material price fluctuations, the risk of new product introduction not being as expected, and the repeated risks of the new crown epidemic.