20220429-招银国际-伊利股份-600887.SH-1Q22_in_line__management_guidance_implies_c.10__2022E_core_revenue_growth_5页_942kb

Yili Industrial (600887 CH) Summary

Core Content

Yili Industrial reported its 1Q22 results in line with expectations, with a revenue growth of 13% YoY, although slightly affected by higher-than-expected promotional expenses for the Winter Olympics. For the full year of 2021, the company achieved a 14% revenue growth and 23% net profit growth, outperforming the dairy industry in Asia. Management guidance for 2022E suggests a core revenue growth of around 10%, slightly below previous forecasts, but with a revised revenue target of RMB129.6bn, implying 17.2% YoY growth.

The company has raised its stake in Ausnutria to 59.17% since mid-March, which is expected to be consolidated starting from 2Q22. This consolidation is considered in the updated 2022E targets. The target price for Yili Industrial is RMB47.0, with a 23.6% upside from the current price of RMB38.0. The new target price is based on a 28.5x P/E ratio, which is one standard deviation above the 3-year average.

Main Segments Performance

• Liquid Milk: Continued to outperform the industry, achieving a 40% market share and leading in growth.
• Milk Powder and Products: Showed the highest growth, with a 25.8% YoY increase and second-largest market share. The cheese business saw a significant revenue growth of over 150% and improved its market share by 6.3ppt.
• Frozen Dairy: Maintained the leading position in the sector for the 27th consecutive year.

Financial Highlights (2021 and 2022E Projections)

Management Outlook

• NPM Target: Management aims to achieve a 9-10% net profit margin by 2025E.
• Long-term Vision: Aspires to become the largest dairy firm globally.
• Market Potential: Sees a large upside in China's dairy market, with annual per capita milk consumption below 25kg compared to the global average of 113kg.
• Segment Growth Drivers:
  • Liquid Milk: Expected to benefit from consumption upgrade and penetration into lower-tier cities.
  • Milk Powder: Anticipated to grow with the rebound in birth rates and favorable policies.
  • Cheese: Seen as entering a prime growth phase due to product differentiation, channel expansion, and consumer education opportunities.

Key Ratios and Performance

• P/E Ratio: New target is 28.5x (unchanged), while consensus P/E for FY22E is 23.0x.
• P/B Ratio: 28.5x (unchanged), with trailing P/B values ranging from 4.8x to 4.0x.
• Yield (%): Expected to increase from 2.6% in FY21A to 4.8% in FY24E.
• Net Gearing (%): Maintained as net cash in FY21A and projected to remain so in 2022E and beyond.

Shareholding and Performance

• Shareholding Structure:

  • HKSCC: 14.9%
  • Huhe Haote Investment: 8.4%
  • Pan Gang: 4.5%

• Share Performance:

  • 1-mth: +5.6% (Absolute), +11.1% (Relative)
  • 3-mth: -3.4% (Absolute), +14.7% (Relative)
  • 6-mth: -11.5% (Absolute), +8.6% (Relative)

Earnings Revision

Financial Summary

Income Statement (YE 31 Dec)

• Revenue: Increased from FY20A to FY21A and projected to grow further in FY22E.
• Gross Profit: Rose YoY, with a 0.5ppt improvement in GPM to 30.3%.
• EBIT: Showed steady growth, with an 8.66% operating margin in FY22E.
• Net Profit: Increased by 23% YoY in FY21A, with a projected 15.6% growth in FY22E.

Cash Flow Summary

• Net Cash from Operating Activities: Fluctuated between positive and negative values across years, with a notable decrease in FY22E.
• Capital Expenditure & Investments: Increased in FY22E, with a focus on growth and consolidation.

Balance Sheet (YE 31 Dec)

• Total Net Assets: Grew from RMB30,533 mn in FY20A to RMB59,411 mn in FY24E.
• Shareholders’ Equity: Increased from RMB30,384 mn to RMB58,253 mn by FY24E.
• Current Ratio: Stabilized around 0.5x, indicating moderate liquidity.
• Inventory Turnover Days: Increased to 50.0 days, suggesting a potential slowdown in inventory management.

Conclusion

Yili Industrial is positioned for continued growth in the Chinese dairy market, with a strong presence in key segments such as liquid milk, milk powder, and frozen dairy. Management guidance and performance in 2021 suggest a positive outlook for 2022E and beyond, with a focus on improving net margins and expanding market share. The company is rated as BUY, with a target price of RMB47.0, reflecting confidence in its future performance and growth potential.