First published in the public number: Zhi Chang Rong
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Preface
Dali Foods, born in 1989 in Hui'an County, Fujian Province, created the "Dali Garden", "Subic", "Yummy point", "and its Zheng", "Lehu" and other well-known brands in the industry, the formation of food, beverage two pillars of the industrial structure, family consumption business for the company's current performance of the new growth point. The family consumption business is a new growth point for the company's performance.
The core logic of the good Dalai food:
1, Dalai is the implementation of the multi-brand follow strategy, in the various segments, Daliyuan is the first of the pastry category, Kopi is the second of the potato category, tasty point is the cookies category 2-3, and the and its is the third of the herbal tea category, the Lehu is a functional beverage category 2-3, Doubendou and the beauty of the baked chen points are No. 2, and is currently in the high-speed development.
Bakery pastries, potato chips, cookies, functional beverages, herbal tea, etc. are very competitive industry, Dali Foods can be a latecomer in all different new areas are firmly established and ranked at the forefront, which illustrates Dali Foods in the production, sales, management and other aspects of the ability to excel.
2, from the point of view of the industry, casual food and beverages are FMCG, high consumption frequency, short time frame, with a wide range of consumer groups, market demand is relatively stable.
3, from the financial point of view, the company's gearing ratio is very low, there is no interest-bearing liabilities, the financial situation is relatively healthy; cash accounted for more than 50% of the total assets, the cash on the books is very abundant. 2019 gross profit margin of 39.7%, the net interest rate of 17.97%, the profitability is very good compared to peers.
Affected by the epidemic, the company's performance in the first half of 2020 is expected to have some downward pressure. However, after the epidemic, the food and beverage industry in the highest degree of demand recovery is frozen and casual food, Dali's revenue of nearly 50% from casual food, is expected to small bread, potato chips, cookies and other products in the first half of the year by the impact of the epidemic is not big, Q1 a slight decline, but Q2 full recovery, the first half of the casual food segment revenue is expected to be flat.
From our field research data in Shenzhen Fukai supermarkets, Daliyuan small bread, Kobik and other casual food the latest production date are in July, indicating that the company's casual food sales are good.
Beverage segment, functional beverages and herbal tea revenue is expected to have a substantial decline, is expected to decline by about 15% year-on-year in the first half. Home consumption segment, Douben Dou is expected to Q1 sharp decline, but Q2 rebound, is expected to decline slightly in the first half of the year; Meibeichen short-insurance bread, is expected to be little impact by the epidemic, under vigorous promotion, is expected to be a substantial increase in the first half of the year, home consumption segment is expected to be a single-digit growth in the first half of the year. 2020H1, is expected to Darley revenues declined by about 5%.
In the second half of the year, casual food is expected to continue to maintain solid growth, plate annual revenue is expected to grow by about 2% to 10.35 billion; beverages in the second half of the year is the peak season, is expected to usher in a faster recovery, beverage plate is expected to decline by 5% for the year, with revenues reaching $6.8 billion; family consumption plate is expected to continue to maintain a faster growth in the second half of the year, plate annual revenue growth of about 25% to 3.3 billion. billion.
Dali Food's full-year revenue is expected to grow slightly by 1.5% to RMB 21.696 billion, while net income is expected to grow by 1.79% to RMB 3.91 billion. Corresponding to the current share price, the price-earnings ratio is less than 15 times, significantly lower than the average value of 19.82 times PE of the food and beverage industry in Hong Kong. On top of that, in terms of dividend payout, Darley has a dividend yield of up to 6% in 2019, which we think is worth paying attention to as a solid underlying.
Industry Data
Production: according to the National Bureau of Statistics, as of March 2020, the cumulative value added of the domestic food manufacturing industry declined by 7.9% year-on-year, and the cumulative value added of the alcoholic beverages and refined tea manufacturing industry declined by 14.7% year-on-year; as of June 2020, the cumulative value added of the food manufacturing industry declined by 0.5%, and a cumulative year-on-year decline of 6.1% in the wine, beverage and refined tea manufacturing industry.
Benefits: According to the National Bureau of Statistics, as of March 2020, the cumulative value of operating income of the domestic food manufacturing industry was 397.8 billion yuan, a year-on-year decline of 7.8%, and the cumulative value of operating income of the wine, beverage and refined tea manufacturing industry was 316.91 billion yuan, a year-on-year decline of 15.6%; as of June 2020, the cumulative value of operating income of the food manufacturing industry was 899.21 billion yuan. year-on-year growth of 1%, alcohol, beverages and refined tea manufacturing industry operating income cumulative value of 700.84 billion yuan, down 6.4% year-on-year.
Summary: 2020Q1 food and beverage industry operating conditions have declined year-on-year, of which the beverage Q1 decline is very large; Q2 as the epidemic eases, the food and beverage industry have ushered in the improvement of business conditions, food manufacturing in Q2 has covered the decline in Q1, recorded a positive growth, while the beverage industry is still about 6% decline.
Performance Review
The company's 2019 operating revenue of 21.375 billion, compared with 20.863 billion in 2018, an increase of 2.45% year-on-year, and 2019 net profit of 3.841 billion on attributable net income, an increase of 3.34% year-on-year. In the past 5 years, the company's revenue and profit have shown a downward trend in growth.
In terms of the composition of 2019 revenue, casual food (Daliyuan, Kopi, Yummy Spot) revenue of 10.154 billion, -2.43% year-on-year, accounting for 47.53% of total revenue; ready-to-drink beverages (Wojizheng, Lohu) revenue of 7.142 billion, -2.08% year-on-year, accounting for 33.43% of total revenue; and household consumption income (Doubendou, Meibeichen) 2.657 billion, up 41.71% year-on-year, accounting for 12.44% of total revenue.
It can be seen that casual food and ready-to-drink beverages, which account for the largest share of the company's revenue, are both down year-on-year this year, and the reason why the current year's operating income can still grow year-on-year is mainly dependent on the company's new products, Douben Dou and Meibeichen. the company's overall gross profit margin of 39.75% in 2019. Among the three segments, household consumption had the highest gross margin of 49.53%, followed by ready-to-drink beverages with a gross margin of 46.71%, and casual food with a gross margin of 37.37%.
Performance forecast and valuation
In the wake of the epidemic, the food and beverage industry in the highest degree of recovery in demand is frozen and casual food, Dali's revenue of nearly 50% from casual food, is expected to small bread, potato chips, cookies and other products in the first half of the year by the epidemic is not much impact on the Q1 a small decline, but Q2 full recovery!
Beverage segment, functional beverages and herbal tea revenue is expected to have a substantial decline, is expected to decline by about 15% year-on-year in the first half. Home consumption segment, Douben Dou is expected to Q1 sharp decline, but Q2 rebound, is expected to decline slightly in the first half of the year; Meibeichen short-insurance bread, is expected to be little impact by the epidemic, under vigorous promotion, is expected to be a substantial increase in the first half of the year, home consumption segment is expected to be a single-digit growth in the first half of the year. 2020H1, is expected to Darley revenues declined by about 5%.
In the second half of the year, casual food is expected to continue to maintain solid growth, plate annual revenue is expected to grow by about 2% to 10.35 billion; beverages in the second half of the year is the peak season, is expected to usher in a faster recovery, beverage plate is expected to decline by 5% to 6.8 billion for the full year; family consumption plate is expected to continue to maintain a faster growth in the second half of the year, the plate annual revenue growth of 25% or so, to 3.3 billion. For the full year, Dali Food's revenue is expected to grow slightly by 1.5% to reach RMB21.696 billion, while net attributable profit is expected to grow by 1.79% to reach RMB3.91 billion.
Valuation: free cash flow = net profit + depreciation - capital expenditures - changes in working capital, it is expected that the future of Dali depreciation and capital expenditures are basically offset, working capital to increase the company's free cash flow, the company's free cash flow in the net profit of about 105%. It is expected that the free cash flow in 2020 will be 4.105 billion, with a compound growth rate of 6% over the next five years, a perpetual growth rate of 3%, and a discount rate of 10%, giving Darley Foods a valuation of 68.517 billion yuan, which translates into 75.163 billion Hong Kong dollars, corresponding to a share price of 5.5 Hong Kong dollars.
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In the summer of 2020, Heqi is working together with Kugou to create the "Play Seal Script Ancient Language Bottle", which will pull up the national tide. The cool wind. This activity, in the Xiamen subway, line 1 of the panoramic package car, line 2 of the brand train, at the same time to start the formation of a city-wide linkage landscape.
Baidu News:
1, July 27, 2020 "Fortune" China's top 500 list was released. Hong Kong-listed Dali Food (03799) has become one of the top 40 companies in the return on net assets among the top 500 companies while appearing on the list. "Fortune" China's top 500 companies with the highest return on net assets of 40 companies "list shows that the return on net assets of Darley Foods for 23.6%, ranked 27th
2, Nestle rumored to be $400 million to sell Silver Heron, bidders may include China Resources Breweries (00291), Master Kong (00322), and Dali food (03799). According to Nestle's 2020 quarterly report released on April 24, the company has decided to take a strategic look at its Yinlu peanut milk and Yinlu canned eight-treasure congee business in China, including the possibility of a sale, with the aim of ensuring the long-term growth and success of the business, while Nescafe's coffee ready-to-drink business, which is currently being bottled and distributed by Yinlu and is experiencing good growth, will be retained. Yinlu was acquired by Nestle in 2011. The Swiss company tried to capitalize on rapidly growing demand in China, but after a few years found itself struggling to grow.
Major categories of Jingdong sales:
Family consumption segment:
Douben Bean: Douben Bean Original Flavor price is higher than the original flavor of Vitasoy, the sales volume is not comparable to the Vitasoy; Douben Bean Vai Zhen is the cost-effective varieties of the Darley launched, but the nutritional content To be lower than the original flavor, the price is also lower, sales are not as good as the original flavor.
Meiluchen: Meiluchen currently sells the best in Jingdong is the whole wheat toast type of bread, and Peach Lee's similar products are about the same price, but the sales volume is far less; Peach Lee also has pumpkin pulp toast, light core toast and other relatively high-end products, the price is also higher.
Price trends: stripping out the impact of coupons and the like, Douben Dou's price has remained basically unchanged since August 2018; Meiluchen's price has not changed so far this year.
Casual food segment , the main statistics accounted for a large proportion of bakery pastries:
The main categories include French soft bread, French buns, Swiss rolls, the competitor is Pan Pan Foods, in terms of price, Dali is a little cheaper than Pan Pan, but the sales volume is much higher than Pan Pan.
Price trend: Darley Park pastry products raised prices by about 10% at the beginning of 2019, excluding the impact of coupons, the price is basically unchanged since the beginning of 2019.
Ready-to-drink beverage segment:
Lehu: the main competitors are Dongpeng Special Drink and Red Bull. From the price point of view, Lehu is higher than Dongpeng Special Drinks lower than Red Bull, from the sales point of view, Lehu is significantly lower than Dongpeng Special Drinks and Red Bull.
Heqizheng: the price is lower than Gadobao and Wanglaoji, and the sales volume is much smaller than Gadobao and Wanglaoji.
Price trend: excluding the impact of coupons and other factors, the price of Lohu in the past two years basically unchanged; and its Zheng in the past two years basically unchanged price.
Note: The above is as of August 10, the data situation of Dali's largest-selling products in each category in Jingdong, but because Dali's sales are mainly offline, so more as a reference, hopefully, can be a tracking of Dali's product sales in various categories.
Stockbrokers' view: 1, Macquarie raised the first half of the sales of Darley is expected to fall 6.7%, with Darley in the mid- to high-single-digit decline in line with the guidelines, while the rise in this year's and next year's earnings forecasts, respectively, 11% and 6%; to maintain the "underperforming the market "Rating, target price from 3.7 yuan to 3.9 yuan. 2, CICC's latest research report is expected to 2020H1 revenue fell 7.8% year-on-year, of which casual food revenue fell 1% year-on-year, beverage revenue fell 21% year-on-year, household consumption revenue rose 8% year-on-year; 2020H1 earnings fell 8% year-on-year. 2020H2 food sector is expected to continue Q2 trend in the second half of the year, recorded a double-digit growth; beverage sector or is expected to achieve medium-high single-digit growth, partially offsetting the decline in the first half of the year. The beverage segment may be expected to achieve mid-to-high single-digit growth, partially offsetting the decline in the first half of the year. It is expected that the company's categories are expected to achieve solid growth in the second half of the year, and annual revenue is expected to return to positive growth. Maintain "outperform" rating and target price of HK$6.3. 3, JP Morgan Chase will be Darley Food (03799) target price from 6.4 Hong Kong dollars raised to 6.6 Hong Kong dollars, while the rating maintained "hold". Morgan published a research report, said Dali food first quarter sales fell 20% year-on-year, is expected to return to mid-single-digit growth in the second quarter sales, mainly in the second quarter thanks to the bread and snacks business driven by the positive trend, and the company's beverage business in June will also achieve positive growth, the company is currently subject to the launch of new products in the second quarter and last year to complete the distribution channel reform strategy of the good. Darley's sales and core business EBIT are expected to fall 8.6% and 8.7% year-over-year in the first half of the year, while rising 13.1% and 17.8% year-over-year in the second half. Competitor news: 1, the first half of 2020, Tao Li Bread achieved revenue of 2.739 billion yuan, up 7.08% year-on-year; to achieve net profit attributable to shareholders of listed companies of 418 million yuan, up 37.52%. In the short-insurance bread segment, Tao Li market share of 29.4% (2018 data). 2, July 28, in response to a media release entitled "Peach Lee Bread glossy performance of the hidden worries: important dealers disappeared real controller family crazy cash" article, Peach Lee Bread issued a clarification announcement on the media reports, said the text refers to the "disappearance of the dealers" is inconsistent with the facts, some of the dealers according to their own planning The company's business model is based on its own planning to change the main body of the business or terminate the business, is the dealer's own business decisions; 3, Vitasoy drinks have been 3 consecutive months by the customs refused to enter the country. Recently, the General Administration of Customs released the June 2020 unauthorized entry of food and cosmetic information, Vitasoy International Group Limited production of Vitasoy Original Soya Milk due to unqualified labeling is not allowed to enter. So far, Vitasoy beverages have been refused entry by Customs for 3 consecutive months,*** 6 batches of products, the reason for not being allowed to enter the country is the over-range use of the nutritional fortifier Calcium Pantothenate. Financial data show that in fiscal year 2020, Vitasoy International realized operating income of 6.623 billion yuan, a slight decrease of 3.9% year-on-year, and realized net profit of 490 million yuan, a year-on-year decline of 23%.