Yili Co. (600887) Interim Review: Market share keeps improving and looks at long-term development
The text of the report, Yili Co., Ltd. announced its 2019 Interim Report, and the company achieved revenue of 449 in 19H1.
65 trillion, +13 for ten years.
58% of which, Q2 achieved revenue of 218.
88 yuan, +9 for ten years.
37%; the company achieved a net profit of 37 attributable to its mother in 19H1.
810,000 yuan, ten years +9.
71%, of which Q2 achieved net profit attributable to mother 15.
5.0 billion, ten years +11.
83%; the company’s 19H1 net profit after deducting non-return to its mother was 35.
19 trillion, ten years +9.
00%, of which Q2 realized non-return to the mother net profit of 13.
37 trillion, ten years +8.
69%; the return is 0.
Key investment points: The volume of high-end products has increased, the channel penetration rate has increased, and revenue has maintained a steady increase.
The company achieved revenue of 449 in 19H1.
6.5 billion, +13 per year.
58% (Q1: +17.
89%; second quarter: +9.
Among them, the growth rate of Q2 revenue was affected to some extent by the competition of low-price promotion of competing products, but benefited from the volume of single products and channel penetration. Under the background of intensified competition in the industry, the market share of room temperature and milk powder products of 19H1 continued to increase.
Single product volume is still driven: 19H1 liquid milk / milk powder and dairy products / cold beverage products accounted for 80% of revenue.
63% / 9.
78% / 9.
59%, two years -2 compared with 2018.
80pct / -0.
44 points / + 3.
We judge that the volume of large single products and new products is still the driving factor for the growth of liquid milk: the company’s “Golden Code”, “An Muxi”, “Chang Qing”, “Every Yitian”, “Happy Day”, “Golden Collar”, “Cleverz”, “Sparse selection”Changyi 100%” and other key products sales revenue + 30% per year; the company’s new product sales revenue accounted for 17%.
4%, an increase of 2.
6pct, also contributes to income increase.
It is worth pointing out that Nielsen Zero Research data shows that the retail sales of domestic normal temperature liquid milk, low temperature liquid milk and milk powder segments in 19H1 were +3 respectively.
7% and +8.
8%, of which, the retail sales of organic dairy products segment increased by 13 over the same period last year.
Taken together, the company’s revenue growth is still clearly ahead of the industry.
Terminal penetration rate continues to 南宁桑拿 increase: Nielsen zero research data shows that the company’s market share of room temperature / low temperature liquid milk / infant formula in the first half of the year were 38.
2% / 16.
4% / 6.
4%, +2 each year.
4pct / -1.
1pct / + 0.
6pct, in which the market share of room temperature category increased significantly, indicating that the company’s channels continued to sink.
The market penetration of 19H1 company’s room temperature liquid dairy products was terminated.
9%, ten years +2.
7pct, its penetration in third- and fourth-tier cities penetrates 86.
2%, ten years +2.
From the perspective of sales model, the proportion of revenue in the 19H1 distribution / direct sales model was 96.
83% / 3.
17%, the proportion of distribution continued to increase, the company’s e-commerce business income increased by +31 each year.
By region, 19H1 North China / South China / Other regions revenue ratio was 28.
64% / 24.
99% / 46.
37%, two years -1 compared with 2018.
66 points / -2.
03pct / + 3.
69pct, regional expansion is still actively pushing forward.
The increase in costs is manageable, and the gross profit margin is basically flat.
The company’s gross profit margin for 19H1 was 38.
58% (first season: 39.
95%; second quarter: 37.
13%), at least -0.
82pct, mainly due to the continuous rise in raw milk prices and the temporary impact of the product (the high-end product volume in the peak season of Q1 is significant).
The price of raw milk has continued to increase since 19 years: as of June 26, the price of raw milk in 22 main producing areas in China was 3.
57 yuan / kg, +5 for ten years.
6%; Fonterra’s full-fat milk powder auction price was $ 2,969 / tonne until July 2, +45 since the beginning of the year.
From the initial point of view, the domestic environmental protection production restriction order has increased raw milk supplementation for 18 years, and is expected to reduce the stock affected by weather in the near future. The distribution of Fonterra milk powder auctions has decreased, and the price of raw milk in the peak season is expected to keep rising.
From a preliminary point of view, the current price of raw milk still has a price difference compared to feed prices, and the global raw milk production is insufficiently motivated to reduce production. If it is not a natural disaster, it will be difficult for raw milk prices to start a growth cycle in 19 years. The increase in demand in emerging markets is expected to keep the price of milk powder in the medium termUpward trend.
Expense rates are down every second, hedging cost pressures.
The company’s 19H1 expense ratio was 29 overall.
01%, Decade -0.
Among them, sales expenses expenses 24.
63% a year -1.
83pct. From the core subjects, the increase rate of labor insurance premiums and employee compensation are +80, respectively.
92% and +32.
61%, advertising and marketing expenses were basically flat at last year’s high base, and increased slightly in recent years2.
05%; management expenses 4.
25%, ten years +0.
75pct, mainly related to labor and labor insurance premiums, intangible assets vendors, and employee compensation increased by +96.
40% / + 69.
72% / + 68.
74%; financial expense budget -0.
32%, -0 per year.
41pct; R & D expense 0.
45%, ten years +0.
In 19H1, the company’s expense ratio was hedged by downward pressure on costs; in 19H1, net profit attributable to mothers was 37.
810,000 yuan, ten years +9.
71% (Q1: +8.
36%; second quarter: +11.
19H1 net profit is 8.
41% (Q1: 9).
86%; second quarter: 6.
87%), at least -0.
19H1 company operating cash flow for two years -28.
73%, mainly due to the increase in raw material procurement and cash payments to employees, which increased operating cash expenses.
In the medium term, there is still uncertainty in the industry’s structure, but the company’s platform development trend is good: the competition still has uncertainty, and Yili has the first-mover advantage through channels.
Mengniu further increased product promotion and brand promotion in 19Q2. It is expected that Yili will continue to maintain a relatively high expense in order to increase market share.
Yili’s channel is more sinking than Mengniu’s. The former accounts for 40% in the third and fourth tier and township markets, but 36%. Correspondingly, Yili’s market share in the third and fourth tier and township markets reaches 33%.35%, while Mengniu is 28-32%, low-tier cities will be the core market for the future increase in demand for the dairy industry.
In our judgment, Mengniu may still maintain a strong attitude in its competitive strategy. The uncertainty of the preliminary competitive landscape may still make its performance likely to change. However, considering the channel ‘s leading issue board in Yili ‘s lower-tier market, it is expected that Yili ‘s defensive position will remainAdvantages.
Long-term: The core strategy of Yili’s strategic layout is category expansion, which is expected to become the Chinese version of Nestle.
14H2 Yili put forward a long-term plan to become a 100 billion health food group by 2020.
The plant protein beverage walnut milk introduced at the end of 2014 marked the opening of Yili’s category expansion. In 18 years, it also focused on creating “plant selection” soy milk products. In 19 years, it began to layout the field of milk drinks and mineral water. Cross-category expansion will continue for the company’s futureThe cornerstone of steady development.
Yili is expected to enter the major health-related industries such as functional drinks, fruit juices, snack foods, and even health foods through endogenous and extended mergers and acquisitions to provide new momentum for the company’s long-term growth.
Following the announcement of the acquisition of Thai ice cream brand CHOMTHANA in 18 years, the company’s acquisition in New Zealand has also landed, and the trend of expanding regions and enriching categories is obvious.
Category expansion can share channel resources and diminish marginal expansion. At the same time, Yili’s merger and acquisition expansion is cautious, and it is preferred that the acquisition target can produce synergy with the company and has a foundation of performance stability.
Profit forecast and investment advice The company is a leading dairy company, with its main business share increasing and platformization trend, and its future performance prospects are considerable.
We expect the company’s revenue to be 900 in 2019 and 2020 respectively.
400 million (+13.
2%) and 1017.
100 million (+13.
0%) and net profit was 72.
0 billion (+11.
8%) and 81.
300 million (+13.
0%), corresponding to the closing price on August 29, 2019. The company’s PE in 2019 and 2020 will be 25x and 22x, respectively.
Maintain the level of “prudent overweight”.
Risks prompt increased industry competition, rising raw material prices, and food safety issues