Fuling Mustard (002507) Depth: Liu An Hua Ming You Yi Village
Investment Highlights Past and Present of Wujiang Mustard: The historical records of mustard can be traced back to the Song Dynasty. Among them, the quality of green cabbage in Fuling District is the best, and the brand of mustard in Fuling District is Wujiang Mustard.
The company’s mustard products accounted for 85.
1%; regional distribution is balanced, 上海夜网论坛South China is relatively high, accounting for 29.
The company’s core executives hold 2% of the shares, with considerable operating efficiency.
The company’s revenue in 2018 reached 19.
14 trillion, gross profit margin 55.
76%, net interest rate 34.
Dismantling the mystery of price increase: Features of the price increase after the re-examination: The company found after the past two rounds of price increase cycles: 1) The price increase strategy is divided into direct (refer to shore price) and indirect (change packaging specifications) price increase.
Among them, the price increase of packaging will have a certain impact on sales; 2) The frequency of price increases is high and the amplitude is large, and the price increase must be lower than the economic growth rate.
Reasons for dismantling price increase: category attributes give it price increase power: anti-restructuring: the correlation between the growth rate of mustard industry and changes in floating population and disposable income has weakened; category attributes: pickled products with deep processing and strong low-cost consumption productsAttribute, consumers are weakly sensitive to price increases.
Increasing costs give it the opportunity to raise prices: in 2008, 2016 and 2017, cabbage heads were affected by natural disasters to reduce production. At the same time, downstream demand increased, causing cabbage head prices to rise, which was the main reason that triggered the company’s three rounds of direct price increases.
The optimization of channel policies helps the price increase cycle. Both volume and price go up: 1) When price increases are too fast, channel policies boost sales.
In 2009 and 2013, the company adjusted the channel one year after the price increase, and the sales YOY changed from negative to positive. In 2017, the price increase was adjusted in conjunction with the channel strategy adjustment. When the average price YOY exceeded the per capita GDPYOY and household-end food expenditure YOY,Sales YOY is positive.
2) After the direct price increase, the dealers are highly motivated and the channel profits are thickened.
The direct price increase profit is reflected in the terminal, and the change in price increase profit is reflected in the company cost.
Exploring the way forward: short-term: 2019-20 is the period of channel adjustment, sales are expected to gradually rise, and costs will increase and profits will increase.
The channel policy response period is 1-2 years. It is expected that YOY sales will be positive in 2019-20.
The pace of the first two rounds of channel adjustments: the implementation of channel policies in 2009, with significant results in 2009-10; implementation in 2013, responses in 2013; implementation in 2017, significant effects in 2017-18.
After multiple price increases in this round, the pressure on the 18H2 channel inventory is obvious. In 2019, the fine adjustment of the channel has begun to land. It is expected to be effective in 20 years, and sales are expected to accelerate growth.
The price of green cabbage heads will not start to rise in the short term, and the cost dividend may be enjoyed in 2019-20: large-scale benefits can offset the upward cost, and the gross profit margin of mustard must be reduced by 20201.
The 19-year purchase price is known to be around 790 yuan / ton, and the gross profit margin will decrease by 1 in 2019.
87pct; the price of cabbage heads is reduced by 4%, and the gross profit margin will be increased by 1 in 2020.
Medium and long-term: the penetration rate of packaged mustard has increased, the category echelon has been improved, and the long-term growth is still growing.
1) Packaged mustard still has room for both volume and price.
The research data shows that the scale ratio of packaged and non-packaged mustard is 1: 1, and packaged mustard is more in line with the trend of consumption upgrade. The conversion to seize the non-packaged mustard market to increase its share. We measure it at 8: 2, and the company has about 2 times growthSpace, of which sales volume and average price are more than double and 1 respectively.
6 times the growth space.
2) Efficiently promote product echelon development.
By calculating the revenue * (gross margin-advertising / promotional expense ratio) to compare the company’s operating profit conversion, the resulting ground push model is more effective.
3) Develop condiments through the outsourcing acquisition model.
Profit forecast and investment advice: The company is a leader in the mustard industry and fully increases its price. With the product’s multi-dimensional development catalyzed and the overlapping channels sinking, it is expected that the performance will be stable and better.
We expect the company’s revenue to be 20 in 2019-2021.
1.6 billion (+5.
180,000 yuan (+10.0%) and 25.
5.4 billion (+15.
1%), EPS is 0.
86 yuan, 1.
05 yuan and 1.
21 yuan, which corresponds to the closing price on November 1, 2019, and is estimated to be 27x, 22x and 19x in 2019-2021.
Maintain the level of “prudent overweight”.
Risk warning: industry competition intensifies, raw material costs increase, food safety issues, mergers and acquisitions fail