Perfect equity structure to protect the performance of steady growth
Haitian Taste is China's leading seasoning industry. The company's history of soy sauce brewing has a long history, Haitian ancient soy sauce garden can be traced back to the Qing Dynasty, so far has a history of more than 300 years. 1955 Foshan 25 ancient soy sauce garden public-private partnership to establish Haitian soy sauce factory, 1995 completed the reform of state-owned enterprises and successfully restructured into a limited company, since then the Haitian into the rapid development of the stage. 2013 Haitian to become the first condiment industry, sales of more than 10 billion enterprises, in 2014 Haitian on the SSE listing. In 2013, Haitian became the first enterprise in the seasoning industry with sales exceeding 10 billion RMB.
Haitian has been y engaged in China's seasoning industry for more than 60 years, with soy sauce, oyster sauce and seasoning sauce as its core products, and has expanded its product categories to include vinegar, cooking wine, and various kinds of compound seasonings (chicken essence, chicken powder, and hot pot base, etc.). Haitian's brand is y rooted in the hearts of consumers, and the company has been ranked No. 1 in China's brand power index for nine consecutive years, with the largest market share in the seasoning industry and No. 1 in the soy sauce subcategory.
Haitian Development Events
Haitian Taste's main business revenue reached 19.80 billion yuan in 2019, up 16.2% year-on-year, with a CAGR of 15.3% from 2010-2019. Despite the impact of the new crown pneumonia epidemic, the company's revenue in the first three quarters of 2020 still maintains solid growth, operating income rose 15.3% year-on-year to 17.09 billion yuan. 2019 net income from attributable sources amounted to 5.35 billion yuan, an increase of 22.6% year-on-year, with a 2010-19 CAGR of 26.2%. 2020 net income from attributable sources in the first three quarters of 2020 rose 19.2% year-on-year to The first three quarters of 2020 will see a 19.2% year-on-year increase in net profit to RMB 4.57 billion.
2010-2020 Q3 Haitian Taste revenue and growth rate
2010-2020 Q3 Haitian Taste net profit
Benefited from the product upgrading and scale effect, the company's gross profit margin continues to improve. 2019 The company's consolidated gross profit margin increased 12.4pp to 45.4% and net profit margin increased 15.1pp to 27.0% compared to 2010.In the first three quarters of 2020, the company's gross profit margin declined slightly by 2.2pp to 42.3% as a result of adjusting the freight cost to the cost of goods sold in accordance with the new accounting standard. Net profit margin rose 0.9pp to 26.8% year-on-year in the first three quarters as a result of lower selling expenses due to the adjustment of freight costs to operating costs and lower marketing and promotion expenses during the epidemic period combined with the scale effect.
Haitian Taste Industry 2010 - the third quarter of the consolidated gross margin and net interest rate
Guangdong Haitian Group Co., Ltd. holds 58.3% of the shares of Haitian Taste Industry, the largest shareholder. Company executives and other six concerted action as the actual controller directly and indirectly hold 49.7% of the shares. The high percentage of shares held by the company's executives helps to enhance the management's motivation to win in the fierce market competition.
Haitian Taste's shareholding structure (first half of 2020)
The company pays attention to staff training and mobilizes employees' motivation, and its remuneration follows the concept of "high salary, high efficiency and high responsibility". The company implemented the first restricted stock incentive plan in 2014, a total of 6.58 million shares, accounting for about 0.44% of the company's total share capital at the time of the grant, awarding the company in addition to the management of the company's core technology, marketing, production, engineering, management and other key personnel 93 people. The high incentives for general employees will help boost team morale and increase employee loyalty.
Share incentives
Sauces leading position, oyster sauce rapid growth
The company's condiment business is based on the three traditional categories of soy sauce, oyster sauce and sauce, soy sauce is the company's main source of revenue and profit. 2019 revenue share of the three categories is 57% respectively. revenue accounted for 57%, 18% and 11% respectively, and gross profit accounted for 30%, 7% and 6% respectively. With the company's rapid development in the oyster sauce and seasoning sauce categories, soy sauce accounted for a year-on-year decline in the company's operating income (from 72% in 2010 to 57% in the first three quarters of 2020), while oyster sauce accounted for a significant increase in the proportion (from 11% in 2010 to 18% in the first three quarters of 2020).
Benefiting from the rapid growth of the oyster sauce industry, the company's oyster sauce category has the highest growth rate in operating income (2010-2019 CAGR: 19.2%), followed by flavored sauces, while the soy sauce category, due to a more mature and higher base, has a relatively stable growth rate, with a 2010-2019 CAGR of 11.3%.
Gross margins for the three categories of Haitian soy sauce, oyster sauce and seasoning sauce in 2019 will be 50.4%, 38.0% and 47.6% respectively. Benefiting from economies of scale and direct price increases, gross profit margins of the three categories have continued to improve over the past decade, with soy sauce rising the most at 16.8pp, and oyster sauce and sauces gross profit margins also rising by 9.2 and 11.4pp, respectively
Annual Operating Revenue Percentage by Category for the three quarters of 2010-2020
Annual Operating Revenue Percentage by Category for the three quarters of 2010-2020
Strong> Gross Profit by Category, 2010-2019
Haitian Taste's Revenue CAGR by Category, 2010-2019
Haitian Taste's Gross Profit Margin by Category, 2010-2019
< p> The company's soy sauce and oyster sauce products are the absolute industry leaders. For soy sauce, by retail caliber, Haitian Taste's market share is 7.3% in 2019, exceeding second-place Tasty Fresh (3.5%) by 3.8 percentage points . If based on the caliber of ex-factory sales, Haitian Taste's leading advantage is even more obvious. According to our calculations, Haitian Taste's soy sauce sales accounted for 19.9% of the industry's sales in 2019, far exceeding the second-place Zhongtiao High-Tech (i.e. Delicious Fresh) (4.1%).2019 retail caliber soy sauce industry market share
2019 factory sales caliber soy sauce industry market share
For oyster sauce, the company has a significant advantage at the retail end, with a steadily increasing market share. Thanks to the company's cultivation in the field of oyster sauce, the company's market share of oyster sauce products increased at a faster rate. By retail caliber, the market share of the company's oyster sauce was 33.3% in 2015, and increased by 8.9 percentage points to 42.2% in 2019. The market share of the company's oyster sauce products exceeded the second-ranked Lee Kum Kee (30.5%) by 11.7 percentage points in 2019.
Market share of retail-caliber oyster sauce industry in 2019
Market share of Haitian Taste's oyster sauce products in 2015-19
Rising tonnage price pushes up soy sauce gross profit margin
Haitian Soy sauce is brewed using traditional natural fermentation technology, which is a complex process that requires six procedures to complete. The company's soy sauce production technology content is high, the quality requirements are strict, the finished product production is completed, but also after three inspections before the final packaging and warehousing. Combined with modern technology and big data, the quality of the product is stable and has achieved a very high level of standardization.
Haitian soy sauce production process
Haitian soy sauce category in the first three quarters of 2020 revenue of 9.73 billion yuan, an increase of 12.1% year-on-year, the period of 2010-19 CAGR of 12.7%; 2019 gross profit of 5.86 billion yuan, an increase of 13.2% year-on-year, the period of 2010-19 CAGR of 17.7%. Gross profit will reach RMB5.86 billion in 2019, up 13.2% year-on-year, with a CAGR of 17.9% over 2010-19. Benefiting from the optimization of soy sauce product structure, the company's tonnage price has steadily increased, and the average selling price of soy sauce products will be RMB5,355.5/ton in 2019, up 26.0% from 2010, driving the gross profit margin of soy sauce category up 16.8pp to 50.4% from 33.6% in 2010. strong>
Haitian oyster sauce category in the first three quarters of 2020 annual operating income of 3.01 billion yuan, an increase of 18.2% year-on-year, the 2010-19 period CAGR of 21.5%; gross profit in 2019 amounted to 1.33 billion yuan, an increase of 13.3% year-on-year, the 2010-19 period CAGR of 25.3%. Benefiting from the accelerated penetration of oyster sauce in the diet of residents, the company's oyster sauce sales are expanding rapidly, and its revenue share has far exceeded that of flavored sauces to become the company's second largest single product.
Among the company's three main categories, oyster sauce has the lowest gross profit margin, and the gross profit margin of oyster sauce category in 2019 is 38.0%, lower than that of soy sauce and flavored sauce category by 12.4 and 9.6 pp, respectively. However, in recent years, benefiting from the direct price increase and the scale effect, the gross profit margin of oyster sauce category is rapidly improving.
Oyster sauce category revenue and growth rate
Oyster sauce category gross profit and growth rate
The company's sauce category in the first three quarters of 2020 operating income of 1.95 billion yuan, an increase of 10.2% year-on-year, the CAGR of the period of 2010-19 is 16.4%; gross profit in 2019 amounted to 1.09 billion yuan, up 9.1% year-on-year, with a CAGR of 20% over the 2010-19 period. Flavored sauces gross margin is second only to soy sauce, up 11.4pp from 36.2% in 2010 to 47.6% in 2019.
Sauce category revenue
Sauce category gross profit
Product categories still have room for expansion in the future
After years of development, through self-built, mergers and acquisitions and other ways to expand product categories, Haitian from a simple, simple, and simple, to a more efficient and effective way. Similar to Kamehameha, the continuous expansion of the category has provided the company with a new growth curve, driving it to gradually widen the gap with other competitors.
Promoting segmentation and upgrading within traditional categories such as soy sauce
Within Haitian's three traditional categories (soy sauce, oyster sauce, and sauce), we have formed five big star products with sales of 1 billion RMB (Haitian Golden Soy Sauce, Haitian Straw Mushroom Soy Sauce, Haitian Flavorful Fresh Soy Sauce, Haitian Superior Oyster Sauce, Haitian Soy Bean Sauce), and two series of products with 200 million RMB (Haitian Old Fashioned Soy Sauce, Haitian Soy Sauce, Haitian Soy Sauce). products (Haitian Old Series (soy sauce) and Haitian Organic Series (soy sauce)), as well as numerous small and medium-sized products. The average price of the company's billion-dollar products is around RMB 9, which is a mid- to low-end product in the mainstream price band, covering most consumer groups. In 2013-2014, the launch of Haitian's old series and organic series successively strengthened the company's high-end product matrix, catering to the trend of quality and health under the trend of consumer upgrading.
1 billion yuan of large single product and 200 million yuan of series products
If we look at the categories, the company's soy sauce and oyster sauce products are rich in variety, with a comprehensive layout of high, medium and low-end. Soy sauce varieties include bagged and special series, which are known for their cost-effectiveness, as well as simple and organic series, which focus on the healthier end of the spectrum. Haitian's classic Golden Standard Soy Sauce and Straw Mushroom Soy Sauce have been bestsellers for more than 60 years. In order to consolidate its leading position in the market, Haitian has continued to innovate and upgrade its soy sauces, and to segment its products. For example, in 2014, the company subdivided its Golden Soy Sauce into a series of individual products, such as Sweet Golden Soy Sauce and Fresh Golden Soy Sauce, and upgraded it to Premium Golden Soy Sauce, increasing the content of amino acid ammonia and improving the quality of the product. Haitian also launched a "Naked Soy Sauce" series with only five ingredients on Double Eleven in 2020, and used innovative double-layer technology in its packaging to prevent oxidization and deterioration of soy sauce without the addition of preservatives, in contrast to the "Fresh Squeezed Soy Sauce" series launched by Kikkoman in 2010. The "Raw Soy Sauce" series of freshly squeezed soy sauces was launched by Kikkoman in 2010. Haitian has taken another solid step towards high-end and healthy soy sauce, and it is expected that in the next five years, the proportion of high-end soy sauce in the company's total soy sauce products is expected to increase to 50%.
Oyster sauce is in the expansion of the cultivation stage, low-end products in the value series focusing on high-capacity cost-effective, mid-range products in the best-selling series of 1 billion single product sitting on the top oyster sauce as a representative of the high-end series of a product of fresh oyster sauce and focus on high-quality signature oyster sauce. 2019 Haitian Gaoming oyster sauce production capacity of 600,000 tons, and plans to add expansion of 300,000 tons capacity, in addition to the Jiangsu Haitian plant in the city, the company is expected to increase the proportion of all soy sauce products to 50 percent. In 2019, Haitian Gaoming has 600,000 tons of oyster oil production capacity, and plans to expand 300,000 tons of new capacity, in addition to Jiangsu Haitian plant plans to expand 600,000 tons of production capacity, we expect that the total capacity of Haitian oyster oil in 2023 can reach about 1.5 million tons, and the capacity of 2019-2023 CAGR of about 25%.
As for sauces, led by soybean sauce with an annual sales volume of more than 1 billion yuan of flavor in Guangdong, the company has covered soybean sauce, seafood sauce, bean paste, rice sauce, tomato sauce, garlic chili sauce and other categories, and is expected to develop a piece of heaven and earth in the field of seasoning sauces in the complexity of products.
Haitian's traditional three categories of product matrix
cut into vinegar and other categories with large space
In 2016, Haitian rationalized the category thinking, and began to cut into new categories through the establishment of new subsidiaries or mergers and acquisitions of the same industry. For the choice of new categories, the company tends to layout the space scale and no obvious strong enterprise entrenched categories. At present, the company has stocked new products such as vinegar, cooking wine, pickles and compound seasonings, forming a diversified product matrix. Among them, vinegar and wine are the new categories that the company is focusing on, and together they occupy half of the production capacity of the Jiangsu plant.
Haitian through the new establishment or mergers and acquisitions and other ways of layout of new categories
vinegar, the company has vinegar production capacity of 70,000 tons in Gaoming, Jiangsu plant in 2017 to release 150,000 tons of production capacity, in the same year, the company acquired 70% of the equity of the Zhenjiang Danhe Vinegar Industry (Zhenjiang balsamic vinegar origin marking, with a production capacity of 20,000 tons), totaling ***24 million tons of vinegar production capacity. In terms of wine, the company currently has three series of products and five types of individual products. 2019 Haitian Gaoming has 50,000 tons of wine production capacity, and Jiangsu Haitian plans to add the expansion of 450,000 tons of production capacity, we expect that by 2024 the total capacity of Haitian wine can reach about 500,000 tons, and the 2019-2024 capacity CAGR is about 50%. With the capacity constraints resolved, the company's vinegar and hotpot base products are expected to start releasing volume in 2021.
Haitian launched the Gaoming 2.2 million tons of seasonings expansion project at the end of 2017, with a total expansion scale of 2.2 million tons (including 1.5 million tons of soy sauce, 0.3 million tons of sauce, 0.4 million tons of composite seasonings), and the newly built soy sauce capacity is almost doubled on the basis of the existing one.In 2019, Gaoming's production capacity will increase by 0.4 million tons annually, while Jiangsu Haitian has launched the construction of the second phase and partially put into operation, with the annual production capacity At the same time, Jiangsu Haitian has started the construction of the second phase and partially put into production, increasing the annual capacity by 200,000 tons, and it is estimated that by the end of 2019 the company's total capacity will be about 3.35 million tons. In the next five years, with the gradual implementation of the Gaoming 2.2 million tons project, Haitian's production capacity and technological advantages are expected to continue to support the company's low-cost layout of high, medium and low-end price band categories, to lay the foundation for sustained growth for the "three-five" plan.
Haitian has accelerated the construction of production capacity in recent years
Kamehameha's development has been ahead of Haitian's flavor industry for about 50-70 years. Haitian is still in the growth phase, and expansion is still centered on soy sauce as the core foundation. In the future, as Haitian enters the maturity phase, cross-industry as well as multinational expansion is expected to become the company's new growth curve.
Sales by category in Kamehameha's Japanese market in 2019
Sales by category in Haitian's Chinese market in 2019
High channel coverage and strong competitiveness
p> At present, the company's sales network has achieved 100% coverage of 31 provincial capitals and municipalities, 100% of prefecture-level cities and 90% of county-level markets have been covered, and 90% of inland provinces have sales of more than 100 million. As of the first three quarters of 2020, the Company's operating revenues in the northern, central, eastern, southern and western regions of China accounted for 26.1%, 21.8%, 20.6%, 18.8% and 12.7%, respectively. While North and Southeast China have been the main revenue contributors, the Company has been actively expanding into the Central and West regions. By the third quarter of 2020, the central region has become the company's second largest revenue scale region. 2012 onwards, the central and western revenue growth rate has been consistently higher than the national average, in the first three quarters of 2020, the central/western revenue growth rate of 23.7%/25.6% year-on-year, which is higher than the national about 9-11 pp.
2010 three-quarter regional operating revenues Percentage
Central and western region revenue growth rate in the third quarter of 2011
The company has 5 marketing centers, more than 110 sales departments, more than 350 sales groups or sales offices across the country. Channel refinement is the company has been adhering to the strategy, prefecture-level markets in mature areas Haitian through the adjustment of the structure, intensive coverage points, such as the depth of the development of the market share, non-mature areas of the county township market to take the "from large to small, level by level, sinking" strategy, through the distribution system from the county market sinking to the township, townships, rural areas, to improve the penetration rate of the category.
Haitian Taste has the widest channel coverage
According to the 2020 Asia Brand Footprint Report published by Cato Consumer Index, Haitian Taste ranked fourth among China's FMCG brands with a consumer reach of 570 million and a penetration rate of 75.7%, and it was the only seasoning company in the top ten on the list. The number of consumers reached increased by 6%, continuing to lead China's seasoning FMCG market.
Haitian is ranked 4th in FMCG consumer reach in China
Multi-distributor system helps to cover the market quickly and cost-effectively
Like most seasoning companies, Haitian relies on a distributor system, which is a channel system of first-tier distributors and second-tier distributors. As of the end of the third quarter of 2020, the company had 6,739 primary dealers and more than 12,000 distributors. By region, the company is more capable of selling in the east and south, with per capita revenue as high as RMB4.9 million and RMB4.4 million in 2019, respectively. Due to the vastness of the central and western regions and still in the market expansion stage, the company's sales staff in the central and western regions deployed more vigorously, it is expected that the central and western regions will become the company's new growth highlights in the future.
Distributors by region in the third quarter of 2020
Distributors by region in the third quarter of 2020 per capita revenue
The company does not set up a master distributor in each market, but rather, at least two distributors, and each distributor sells the same products, making competition between distributors intense. The company does not have a master distributor in each market, but has at least two distributors, each of which sells exactly the same products, resulting in fierce competition among distributors and lower markups, while the company has been able to enhance its bargaining power. At the same time, in order to seize the market, the distributors spontaneously expand secondary distributors to develop sales areas, and the cost of downstream construction can be transferred from the company to the distributors. Haitian in the early days with a large number of distributors to run, in a low-cost way to quickly realize the depth of coverage; later the company will be part of the second-tier distributors into a first-tier distributors, to improve the grasp of the end of the market.
The company implements embedded management of dealers, directly to dealers to send manufacturers business personnel, sales managers, while equipped with a professional team of dealers to manage and guide, to help dealers and secondary distributors to expand sales channels and regions, and dealers to build a long-term cooperation **** win mode. In addition the company through the use of first payment after the goods of the strong channel policy, to ensure that the company's initiative in the channel, to avoid their own funds are occupied by dealers. We believe that the company's strong control over dealers and management capabilities behind the company's strong brand strength, consumer trust in the brand, so even in the context of lower channel margins, dealers are still willing to cooperate and take the initiative to bear some of the cost of deep plowing and sinking of the channel. The company maximizes the coverage of market terminals by improving the quality of dealers, and currently covers more than 500,000 directly controlled terminal sales outlets.
Sticky food service channel with high barriers
Haitian is the largest supplier of condiments in the food service channel, with a food service soy sauce market share of about 20.8%. The company's catering channel revenue accounted for about 60%, the main sales of the single product for the grass mushrooms, soy sauce, gold standard soy sauce and other low-end price products. Other seasoning companies in the restaurant channel have a layout, but different positioning and Haitian to form a mismatch competition. For example, Lee Kum Kee and Torch Hi-Tech's products are mainly positioned in the middle and high end, with Lee Kum Kee providing services for high-end restaurants and Torch Hi-Tech focusing on fresh soy sauce.
Since 2020, the restaurant channel has been growing slowly due to the impact of the new Crown Pneumonia epidemic, but we believe that the long-term structural trend remains unchanged and the restaurant industry will continue to expand in the future. As chefs have more stringent taste requirements and are more viscous to seasoning products, meaning that it is more difficult for seasoning companies to capture the share of the restaurant side, the advantage Haitian Taste has built in the restaurant side is easy to defend and difficult to attack. Haitian through the recruitment of professional catering distributors to penetrate the terminal resources, and the new Oriental and other culinary school cooperation, and through the combination of product promotion in the catering channel, the medium and long term we believe that the Haitian Taste in the catering channel penetration will continue to improve, and further seize the catering terminal small and medium-sized brands of the market share.
Earnings Forecast
The company's goal for the year to achieve revenue/net profit of +15%/18% year-on-year, although the fourth quarter of the Chinese New Year is facing late and base pressure, the company is expected to still hope to complete the target.
It is expected that Haitian Taste 2020/2021/2022 operating income of 22.77/264.8/30.73 billion yuan, an increase of 15.0%/16.3%/16.0%; attributable net profit of 6.38/75.7/9.04 billion yuan, an increase of 19.1%/18.7%/19.5%; EPS 1.97/ 2.33/2.79 yuan, the current share price corresponds to PE for 98x/83x/769x.
(1) soy sauce business, the company is expected to 2020/2021/2022 revenue growth rate of 11.1%/13.8%/13.3%, of which the sales volume growth of 13.4%/13.2%/12.2%, the growth in sales price of -2%/0.5%/0.5%. For -2%/0.5%/1%.
(2) oyster sauce business, the company is expected to 2020/2021/2022 revenue growth rate of 23.7%/26.2%/23.4%, of which the sales volume growth of 25%/22.5%/21%, unit price growth of -1%/3%/2%
(3) sauce business, the company is expected to 2020/2021/2022 revenue growth rate of 23.7%/26.2%/23.4%. 2021/2022 revenue growth rate of 11.9%/11.2%/11.1%, of which the sales volume growth of 13%/8%/10%, unit price growth of -1%/3%/1%.
Earnings Forecast Breakdown
Earnings Forecast Summary
Earnings Forecast Summary