Keming Noodle Industry (002661) In-depth report: High-end + low-end two-wheel drive growth in the stage of strategic transformation

Keming Noodle Industry (002661) In-depth report: High-end + low-end two-wheel drive growth in the stage of strategic transformation

Ping An Viewpoint: Summary: The company is a nationwide leader in noodles that is undergoing rapid growth. The new spindle has great vision and aggressively promotes strategic transformation. The company’s performance has been slightly ups and downs due to business adjustments, but the prospects for new business are increasingly bright.

Looking to the future, the long-term high-end noodle business is still growing, and it is expected to maintain a compound growth rate of more than 10%, and the self-supply of flour will increase and the profit will increase.In the end market, after nearly two years of gradual completion of the company’s products, channels, and production capacity adjustment, the low-end noodles entered a rapid sprint period in 19 years.

Leaders smoothly transferred, and a new strategic idea was gradually formed: the company is a leading company in the noodle industry in China. Its production capacity, scale and market share are among the best in the industry. The founder Chen Keming 杭州桑拿 is the actual controller of the company.

In 2016, the company’s core leadership took over from the old to the new. Chen Hong, the son of the founder, served as the general manager, and the corresponding senior management team also made major adjustments.

With the main trend changing, 16-17 years can be described as the transition period of the company’s strategy. Since 18 years, the company’s overall development thinking has gradually become clear. It proposes that the industrial chain should be extended upstream to reduce costs, and strive for low-end markets with cost-effective strategies, supplemented by wetNew development strategy for noodle and noodle seed business cultivation.

Under the new strategy exploration and transformation, the company’s performance has slightly changed due to business adjustments, but the prospects for new business are becoming brighter.

The growth potential of high-end noodles is still sufficient. Use the leading partition to enjoy the upgrade bonus: Although the noodle industry demand is relatively saturated, the high-end noodles have a small base and large space, and continue to maintain a rapid expansion rate for a long time.A healthy competitive environment.

As an absolute leader of high-end noodles, the company has a strong brand recognition, shelf monopoly, and scale advantages to build a broad moat, and has effective functionalization, subdivided product innovation and standardized marketing system. At the same time, refinement continues to strengthen the company’s competitiveness and low-end noodles.The heavy volume is also expected to help accelerate the introduction of high-end noodles to the county and township market channels.

Therefore, the company is expected to benefit from the consumption upgrade dividend, high-end products are expected to maintain a compound growth rate of more than 10%, and the increase in the proportion of self-supply of flour will promote high-end gross profit margins in the next 3 years or 3.

5 pieces, significantly increasing the profit contribution of high-end suspension surfaces.

The low-end noodles entered the era of large integration, and quickly entered the market to harvest the share of miscellaneous cards. The low-end noodles market has a large stock space and the market distribution is scattered and enters the rapid reshuffle period.

Although Jinsha River is the first to take the lead, its scale is far ahead of its peers, but its market share is still replaceable relative to the low-end total scale of 500 inches, and the rising stars still have opportunities for growth.

The company is seizing the potential of the industry, is cutting into the low-end market, learning the successful experience of competing products, adopting measures such as base reconstruction and wheat storage & self-supply to fully integrate the supply chain to reduce production costs, and promotes channels to the county and township markets, as well as grain, oil, and agricultural trade., Wholesale and other distribution channels sink.

With the steady advancement of production capacity and channel adjustment, the company officially launched a new cost-effective new product “Wide Thin Circle” in early 19th, cutting into the low-end mainstream price band.

At present, the new products of “Wide and Fine Circles” are selling well, and they have tried hard to make a big splash.

We estimate that under the rapid volume of low-end noodles, the company’s sales of Ru Pasta are expected to exceed 50% in 21 years, which will lead to a compound growth of more than 20% of Ru Pasta’s revenue. In the future, the capacity of new plants will be fully released and flour mills will be put into production.The gross profit margin is expected to be on a par with the leading low-end noodles leading companies, recovering to about 15%.

Wugu Dojo stopped bleeding successfully, and wheat prices dropped to reduce costs: After the company completed the acquisition of Wugu Dojo in June of 2017, it made in-depth adjustments from cost, channel, and management in multiple dimensions, and has achieved better results.

In 18 years, Wugu Dojo was still offset by about 2,000 trillion due to the relocation of production bases and environmental protection factors, but 1H19 has successfully turned losses into profits. Under the operating strategy of “full cost reduction and widening the country ‘s channels”, it is expected to have 19 years of revenue.Total profit has improved significantly.

Thanks to the high grain output and the reduction in the minimum purchase price, wheat prices have fallen slightly in 19 years, and under the background of the continuous advancement of agricultural supply-side structural reforms and high policy wheat stocks, wheat prices may continue to decline for 20 years.Conducive to the company’s cost pressure gradually eased.

Investment suggestion: The company’s high-end business still has growth potential, and the low-end business is becoming a new growth point under the thick accumulation of growth. The growth momentum is increasingly strengthened, and the success of grain dojo hemostasis and the continued decline in wheat prices are favorable. The company’s performance is expected to cross the initial investmentAfter the period back to the fast track of growth.

We maintain the company’s 19-21 EPS to 0.

62, 0.

80, 0.

The forecast of 98 yuan corresponds to 21 for the current PE.

3X, 16.

5X, 13.

4 times, maintaining the “recommended” level.

Risk reminders: 1. Risk of intensified industry competition: overcapacity in the noodle industry, product homogeneity, and the possibility of increased competition; 2. risk of major food safety incidents: consumers are particularly sensitive to food safety issues.Food safety accidents, it takes a long time for internal consumers to change their freezing point and rebuild their confidence in the brand; 3. Risks of rising raw material prices: The cost of flour, the main raw material of the product, is relatively high, and the rise in prices may cause performance to fall short of expectations.