Zhongtai Securities: Gives Fuling Cai Cai a buy rating

2021-11-02Zhongtai Securities Co., Ltd. Fan Jinsong, Xiong Xinxin, Fang Zhaoqiang conducted a study on Fuling Cai Cai and released a research report "Revenue Improvement, Profitability Under Pressure", this report gives a buy rating to Fuling Cai Cai, the current stock price is 35.66 yuan.

Fuling squeezed vegetables (002507)

Event: The company achieved revenue of 1.955 billion yuan in 2021q1-3, an increase of 8.73% year-on-year; net profit attributable to the mother of 504 million yuan, an increase of -17.92% year-on-year; and net profit attributable to the mother after deduction of non-deduction of 486 million yuan, an increase of -19.22% year-on-year. Among them, 2021q3 achieved revenue of 609 million yuan, an increase of 1.30% year-on-year; net profit attributable to the mother of 127 million yuan, an increase of -39.07% year-on-year; and net profit attributable to the mother after deduction of non-deduction of 113 million yuan, an increase of -45.54%.

Revenue accelerated sequentially, and channel inventories returned to benign. In 2021q3, the company's revenue increased by 1.30% year-on-year, and the cash received from the sale of goods increased by 5.43% year-on-year, which was faster than revenue, reflecting the positive payment of dealers. Q3 revenue growth rate turned positive by -10.78% q2, and we believe that the main series are: (1) the 2020q2 base is higher, and the 2020q3 base is relatively normal. Compared with the pre-epidemic level in 2019, this year's q2/q3 revenue increased by 14%/17% respectively ;(2) The company actively embraced community group buying, and the effect was gradually reflected. According to the feedback of channel surveys, the channel inventory at the end of 2021q2 is at a high level, and after the digestion of 2021q3, the inventory at the end of the quarter fell back to a benign level. Reflecting that the actual sales performance is better, light loading is conducive to the growth of the fourth quarter.

Rising costs have put pressure on gross profit margins and continued to invest in sales expenses. The gross margin of the company in 2021q3 decreased by 7.28 pcts year-on-year to 51.64%, while the gross profit margin of 2021q1/q2 was +2.47/+1.64 pct year-on-year. 2021q1 gross margin increase is more obvious, mainly due to the rapid growth of revenue of 46.86%, effective dilution of fixed costs; 2021q2 gross margin increased by 1.64 pct, mainly due to the same period last year in the recovery of the epidemic, freight and other costs are higher; 2021q3 gross margin fell sharply year-on-year, the main series of companies began to use a large number of green cabbage heads purchased at the beginning of this year, affected by the epidemic and weather, the price of green vegetable heads rose significantly at the beginning of this year, while the price of packaging materials and other prices also formed pressure on gross margins. 2021q3 The company's sales, management, research and development, and financial expense ratios were +13.85, +1.51, -0.38, and -3.64 pct to 29.61%, 3.56%, 0.25%, and -4.90% respectively year-on-year. The sharp increase in the sales expense ratio is mainly due to the company's continuous increase in expense investment since the beginning of the year, and the new brand promotion fee in the first three quarters was 223 million yuan, which was invested in new media (including Internet public relations), ladder media, CCTV and others. The increase in the management expense ratio was mainly due to the increase in employee compensation and the amortization of intangible assets. The decrease in the finance expense ratio was primarily due to an increase in interest income from cash management. On the whole, due to the decline in gross margin and the increase in sales expense ratio, the company's net profit margin in 2021q3 decreased by 13.88 pcts year-on-year to 20.95%.

Profit forecast: Under the background of the price increase of the leading Haitian flavor industry, Fuling Squeezed Vegetables, as the leader with strong pricing power in the subdivision category, is expected to alleviate the cost pressure through price adjustment. According to the company's third quarterly report, we adjusted the profit forecast, it is expected that the company's revenue in 2021-2023 will be 24.80, 28.58 and 3.235 billion yuan, and the net profit attributable to the mother will be 6.68, 9.24 and 1.109 billion yuan (before adjustment, 8.71, 11.27, 1.411 billion yuan), eps will be 0.75, 1.04 and 1.25 yuan, corresponding to pe of 45 times, 32 times and 27 times, and the company's price-earnings ratio in 2022 is in the center of historical valuation. Maintain a "Buy" rating.

Risk warning events: repeated global epidemics and economic slowdown; risk of fluctuations in raw material prices; channel development does not meet expectations; new product promotion does not meet expectations

A total of 16 institutions have given ratings in the last 90 days, 14 buy ratings and 2 overweight ratings; the average target price of institutions in the past 90 days has been 41.39; the Securities Star Valuation Analysis Tool shows that Fuling Cai Cai (002507) has a good company rating of 4.5 stars, a good price rating of 3 stars, and a valuation comprehensive rating of 3.5 stars.