Yili (600887) Company Review: Steady Revenue Growth, Good Profit Performance
Event: The company released three 深圳spa会所 quarterly reports, with operating income of 685 in the first three quarters.
1.7 billion, +12 a year.
6%, net profit to mother 56.
31 ppm, +11 a year.
6%, deducting non-net profit 52.
64 trillion, +12 for ten years.
3%; 19Q3 operating income 235.
500 million, ten years +10.
8%, net profit attributable to mother 18.
500 million, +15 for ten years.
5%, deducting non-net profit 17.
4.5 billion, +19 a year.
Revenue grew steadily and market share increased steadily.
19Q1-Q3 total operating income was 686.
800 million, ten years +11.
98%, operating income 685.
2 ‰, +12 per year.
1) From a quarterly perspective, the growth rates of 19Q1, Q2, and Q3 operating revenues were 18%, 9%, and 11%, respectively.
2) From the perspective of revenue structure, according to the growth of our channel research, in the first three quarters of revenue structure, sales volume contributed about 6%, structural upgrade contributed about 4%, and the ton price increased (buying gift attenuation) was about 2%.
3) In terms of categories, according to the company’s announcement in the first three quarters of the company’s liquid milk revenue accounted for 82.
2%, milk powder accounts for 9.
8%, cold drinks accounted for 8%.
According to our channel survey, the first three quarters of room temperature milk and milk powder revenues are expected to grow at double digits, and cold drinks will maintain a high number of revenues. Low-temperature milk will remain flat due to increased competition in the industry, and overall revenue will meet expectations.
The company continues to focus on organic products and new products.
According to channel research, the company’s current sales revenue of new products is expected to reach 17-20%.
The new Iran dairy drink, the response of the new coffee market is not bad.
“Golden Organic”, “Qingxing Organic”, “Changqing Organic Yogurt” and “Golden Collar Senna Mu Organic Baby Milk Powder” have received good feedback.
4) The market share of 19Q1-Q3 has steadily increased. At room temperature, milk powder maintains the advantage. The overall low temperature has dropped slightly, and the chain has improved.
According to Nielsen data, 19Q1-Q3 room temperature market share was 38.
8% + 2pct per year; low-temperature market share is 15.
0pct, Q3 is better than Q2; infant milk powder market share is 6.
4%, over +0.
6pct, mainly due to the deep cultivation of mother-to-child channels + variety show sponsorship to strengthen the brand.
The increase in gross profit margin was mainly due to the upgrading of the product structure + the overall decline in buying gifts, which offset the impact of the increase in raw milk prices.
The company’s gross profit margin in the first three quarters was 37.7%, increase by 0 every year.
04ppt, 19Q3 company’s gross profit margin was 36%, which was increased by 0 in advance.
From the original cost, according to our channel research, the company’s raw milk purchase price from January to August was 3.
95 yuan / kg, an increase of about 7%, of which 19Q1 rose 5% -6%, 19H1 rose 6-7%, from January to August rose about 7%, bringing cost pressure.
The rise of raw milk means that the industry’s raw milk supply is tight and alternates to the downstream. In terms of products, high-quality milk sources will preferentially meet mid-to-high-end products, but the basic category Q3 found that there is a slight lack of milk.
From the perspective of buying gifts, according to our channel research, Mengniu Telunsu reduced prices in 19Q2, followed by Yili Jindian Q3, high-end products buying gifts increased slightly, basic products Q3 lack of milk buying gifts, overall buying gifts are expected to weaken slightly.
From the perspective of product structure, large single products such as An Mu Xi, Jin Dian, Jin Ling Guan are growth engines, which continue to drive structural upgrades.
We believe that the Q3 structure upgrade is accelerating. The main reason is that the sales volume has increased rapidly after the price reduction of Jindian. Although the original gross margin of Jindian has slightly declined, the Jindian series is still higher than the overall gross profit. The price reduction promotion of high-end products drives the sales to increase rapidly.The proportion increased and the structural upgrade drove the gross profit margin significantly.
Thinking about the competitive landscape and buying gift strategy?
According to the upstream raw milk research, the overall supply is tight. We expect that the modest rise in raw milk prices will continue until 2021. Dairy companies will have a relatively high proportion of raw materials. The overall purchase gift will eventually decline, and the gross profit margin will be promoted to remain stable.
1) From the perspective of the competition pattern, during the current round of rising raw milk prices, because of low gross profit margins, the sales volume of basic products continued to decrease due to low gross margins, and will gradually reduce buying gifts as raw milk prices increase.
Discounted purchase of high-end products is expected to be a staged act. Whether high-end products’ price reduction dividends will continue depends on the upgrade of new products and higher-end products. Considering that the overall new product innovation of white milk is slower than yogurt.
2) According to the channel forecast, Mengniu Trensu Organic + Dream Cover currently accounts for about 30% of the Trensu Series, 15-20% of organics in the Jindian Series, and the overall high-end (organic + imported + Juanshan) ratio.30%, the structure of the two sides is similar, Telunsu, Jin Dian this round of price reductions brought about by the margin of sales growth.
3) Looking to the future, after the structural dividend caused by the price cuts of high-end products in Q2 in 2020 disappears, leading companies will continue to push high-end new products to undertake the current high-end price reduction strategy. Without any high-end new products to undertake, under the pressure of raw milk growth, the purchase of high-end productsGifts are expected to decline, and the overall competitive landscape is improving.
Channel intensive cultivation + brand promotion are all in force, and the sales expense ratio is stable and slightly decreased.
The management expense ratio increased slightly due to the increase in employees and salary increase + equity incentive expenses.
The company’s sales expense ratio for the first three quarters was 23.
7%, -0 per year.
83pct, 19Q3 is 21.
9%, twice -2.
43ppt. The decrease in sales expense ratio was mainly due to the increase in operating efficiency under the effect of scale.
According to the channel survey, 1) We expect the channel expense rate to be stable. As of 19Q3, the number of company distributors is 12,278, an increase of 1,674, and channel sinking and intensive cultivation will continue.
At the same time, other channels are gradually exerting their strength, and e-commerce revenue has grown rapidly. Active cooperation with new retail outlets such as Suning Stores has continued to improve channel capabilities.
2) The increase in advertising costs is expected to increase and decrease the advertising cost rate, mainly due to the high base last year + the efficiency of advertising this year.
19Q3 management expense rate growth rate + 1ppt to 4.
5%, mainly due to the increase in the number of employees in the business division + the salary increase of employees, considering the allocation of incentives in 19Q4 to supplement 4-5 million, we expect the replacement of 19Q4 management expense rate.
3Q19 financial expense ratio is 0.
43%, ten years +0.
58%, mainly due to ultra short-term financing bonds and bank borrowings.
Profitability improved, operating cash flow improved in the third quarter, long-term return on net assets is expected to stabilize at around 20%, and government subsidies in the first three quarters5.
In 19Q3, the company’s net profit was 18.
500 million, ten years +14.
5%, deducting non-net profit 17.
4.5 billion, +19 a year.
6%, net interest rate increased by 0 in the short term.
32ppt to 7.
In the first three quarters, the net operating cash flow was 62 megabytes, which was -20% a year, mainly due to the increase in prepayments for purchasing raw materials and the increase in cash paid for employee expenses.The inflow growth rate is lower than the revenue growth rate mainly due to the discount on the account period of e-commerce + Shangchao KA customers, and the first payment after the distribution channel remains unchanged.
Net cash flow from investing activities -82.
5 ‰, an increase of 22 per year.
USD 800 million was mainly due to the increase in cash paid for the purchase and construction of fixed assets, intangible assets and other long-term assets.
Net cash flow from financing activities -37.
90,000 yuan, mainly due to the increase in cash received for the issuance of ultra-short-term financing bonds and medium-term notes.
$ 300 million, mainly due to the merger of Thailand’s CHOMTHANA COMPANY and New Zealand’s Westland Dairy.
Profit forecast and investment suggestions: We are optimistic about the company’s channel power, brand power, and future city share, which are expected to increase to 904 in 2019-2021.
2 ‰, +13 a year.
9%, net profit was 68.
500 million, ten years +6.
5%, EPS is 1.
37 yuan, corresponding PE is 24X, 23X, 20X.
The company’s equity incentive plan has been passed, with a dividend rate of more than 70% and a ROE of not less than 20%.
Risk warning: raw milk prices rise more than expected, the industry is fiercely competitive, new product promotion is less than expected, and food safety risks.