Hengshun Vinegar Industry (600305): Steady operation of condiments and acquisition of Hengshun shopping mall to improve channel construction

Hengshun Vinegar Industry (600305): Steady operation of condiments and acquisition of Hengshun shopping mall to improve channel construction

Investment Ratings and Estimates: Maintaining 2019-21 Revenue Forecast18.

6, 20.

6, 22.

7 trillion, an increase of 10 each year.

0%, 10.

5%, 10.

3%, maintaining the forecast of net profit attributable to mothers in 2019-212.

88, 3.

25, 3.

70 ppm, respectively -5 per year.

4%, 12.

7%, 13.

9%, corresponding to 2019-21 EPS is 杭州桑拿 0.

37, 0.

41, 0.

47 yuan, the latest closing price corresponding to the PE of 2019-20 is 36, 33 times, maintaining the overweight level.

As a leader in the vinegar industry, the company expands and upgrades its own contradictions in the context of low industry concentration and the continuous promotion of consumption upgrades. At the same time, the company’s receptor system is limited and its overall operating efficiency is significantly higher than other leaders in the condiment industry.If the management mechanism can be improved in the future, there is considerable room for potential improvement in profitability.

The main business of the condiment is stable, and multiple measures are taken to open up the growth space: Hengshun, as a leader in the vinegar industry, has the brand’s product advantages, transforms the company to actively promote channel changes, activates the sales team’s initiative internally, and expands the external port market expansion efforts.Marketing synchronization and other methods have improved the company’s overall competitiveness and achieved good results. At the same time, in addition to the main vinegar industry, the company has also increased the layout of other categories of condiments, and the business of cooking wine and soy sauce has achieved rapid growth.

In the first half of 19, the company achieved nearly double-digit revenue growth. Among them, the main business of vinegar has developed steadily, and the cooking wine business has continued to grow rapidly. It is expected that the company will continue this trend in the second half of the year and maintain double-digit revenue growth.

The proposed cash acquisition of Hengshun Shopping Mall is conducive to exerting synergies: the company issued an announcement on September 26 and plans to invest 44.24 million yuan to acquire 100% equity of Hengshun Shopping Mall, a wholly-owned subsidiary of Hengshun Group.

Hengshun Shopping Center currently has 9 stores, all located in the densely populated area of Zhenjiang City and the tourist scenic area where passenger flow is conducted. It mainly sells Zhenjiang specialty products, mainly Hengshun brand high-end products, and a few other Zhenjiang specialty products.

From the financial situation of Hengshun Shopping Mall, the overall operating trend has been substantially stable, revenue and profits have declined slightly in the past two years, and the book has maintained certain monetary funds. According to the company’s forecast, Hengshun Shopping Mall’s 19-year operating net profit is expected to grow, while Hengshun Shopping MallIt plans to add 2 new stores to achieve steady expansion.

We believe that from a business perspective, Hengshun Shopping Center, as the characteristic sales channel of Hengshun products in the town, has certain synergies with the main business of Hengshun Condiment itself. If the acquisition is successfully implemented, the related party transactions will follow.With the reduction, the company’s own channels and overall sales network will be supplemented, which will help build the brand image of Zhenjiang.

The vinegar industry is still fragmented, and Hengshun is expected to continue to achieve expansion achievements. As one of the subdivisions of the condiment industry, the vinegar industry benefits from the product’s health attributes and multi-functionality, and continues to develop space. It will accompany consumer income in the future.Levels have improved, consumer concepts have improved, and industry has room for coexistence.

The vinegar industry as a whole is still in a highly decentralized state. As the industry leader, Hengshun has a breakthrough first-mover advantage and is clearly leading in terms of brand and product strength. If the internal mechanism can be further streamlined in the future, channel combat power will be improved, and there will be room for improvement.Still very impressive.

Advanced catalysts: Condiment business revenue grows faster than expected, and system reform has breakthrough core assumptions Risks: Performance is lower than expected, industry competition intensifies