Source of this article: Time Weekly Author: Tu Mengying
After several rumors, Haitian Flavor Industry (603288.SH) finalized some product price increase plans.
On October 12, Haitian Flavor Industry issued an announcement and decided to adjust the ex-factory prices of some products such as soy sauce, oyster sauce and sauce, ranging from 3% to 7%, and the new price will be implemented on October 25, 2021.
"The price adjustment of some products may have a certain impact on market sales, so the impact of the price adjustment on the company's future performance is uncertain." In response to the risk of product price adjustment, Haitian Flavor Industry said so in the announcement.
Previously, there were rumors in the industry that Haitian Flavor Industry was about to implement a price increase, with a range of about 5%. On September 27, in response to the rumors of price increases, Haitian Flavor Industry also publicly clarified that due to the continuous sharp rise in the costs of major raw materials, transportation, energy and so on, the price adjustment adjustment of product prices is being evaluated.
"The capital market is not satisfied with the profits of Haitian Flavor Industry, and the price increase is inevitable, but the overall price increase is not high, and it is expected that it will not have much impact on sales." On October 13, Zhu Danpeng, an analyst in the Chinese food industry, told the Times Weekly reporter that in the face of a sharp rise in raw material prices, the internal digestion costs of Haitian Flavor Industry have been unsustainable.
Stimulated by rumors of price adjustments, Haitian Flavor's stock price has remained up since the end of September, and as of the close of trading on October 12, the stock price has risen by more than 20%. However, at the close of trading on October 14, Haitian Flavor Industry closed at 112.38 yuan / share, a slight decline of 1.03%, and the total market value was 473.409 billion yuan.
It is worth mentioning that compared with the highest point of 167.90 yuan / share at the end of January this year, the market value of Haitian Flavor Industry has evaporated by more than 200 billion yuan during the year.
On October 13, in response to the price increase and related development issues, the Times Weekly reporter contacted Haitian Flavor Industry and sent an interview outline, but as of press time, there was no reply.
Or trigger a "wave of price increases"
The continuous increase in the cost of major raw materials has become an operational challenge for Haitian Flavor Industry.
Haitian Flavor Industry's price adjustment products are the main categories of sauces, oyster sauces, sauces and other major categories, mostly composed of upstream raw materials such as soybeans and sugar. "Since the beginning of this year, soybeans and wheat have reduced production and increased prices due to many factors, and the cost pressure of Haitian flavor industry has risen significantly, and prices have to be raised." On October 13, Cheng Yu, a senior researcher and professional investor at the Understanding Research Institute, accepted the Times Weekly reporter.
Soy sauce, oyster sauce and sauce account for nearly 90% of Haitian Flavor Industry's total revenue. In the first half of 2020, Haitian Flavor Industry achieved revenue of 12.332 billion yuan. In terms of product categories, soy sauce products are the main revenue of Haitian Flavor Industry, achieving revenue of 7.016 billion yuan, accounting for more than half of the total revenue; oyster sauce and sauce have achieved revenue of 2.130 billion yuan and 1.475 billion yuan respectively.
In addition to the implementation of this price adjustment rumor, Haitian Flavor Industry has several price increases before.
According to the Industrial Securities Report, from 2010 to 2017, Haitian Flavor Industry has accumulated 4 product price increases. The most recent was in January 2017, when the price margin of most of Haitian Flavor's products increased by about 5%.
In Zhu Danpeng's view, this price increase has little impact on the sales of Haitian Flavor Industry. "Whether it is for dealers or consumers, the industry price increase has become inevitable, is a relatively insensitive factor, and the 5% price increase is relatively reasonable."
However, there are also views that Haitian Flavor Industry's price increase may not be the best node. Chen Qingqing, an analyst at Guosen Securities, said that looking back at the past history, Haitian Flavor Industry mostly raised prices when inventory was at a low level and industry demand was good. "However, at present, the terminal demand is weak, the inventory level is high, and the rapid rise of community group buying, most investors are worried that the terminal price may be difficult to synchronize after the price increase." Chen Qingqing said.
In addition, with the implementation of price increases in Haitian Flavor Industry, it is likely to usher in a wave of "price increases" in the industry.
"As a leading representative of the condiment industry, the price adjustment of Haitian Flavor Industry has a demonstration and leading role in the industry, which will trigger the overall follow-up of the condiment industry, while other enterprises may bring about changes in the market pattern if they do not follow up with the price adjustment." On October 13, Bai Wenxi, chief economist of IPG China, was interviewed by the Times Weekly reporter.
Seek diversification
In addition to the challenges brought about by rising costs, Haitian Flavor's revenue has also been weak.
According to Wind data, from 2017 to 2020, Haitian Flavor's revenue increased from 14.584 billion yuan to 22.792 billion yuan, but the revenue growth rate declined year by year, from 17.06% to 15.13%; in the same period, the net profit growth rate fell from 24.21% to 19.61%.
Entering 2021, the revenue and net profit growth rate of Haitian Flavor Industry further declined, falling to a "single-digit" growth rate. In the first half of this year, Haitian Flavor Industry achieved revenue of 12.332 billion yuan, an increase of 6.36% year-on-year; and achieved a net profit attributable to the mother of 3.353 billion yuan, an increase of 3.07% year-on-year.
From a quarterly point of view, Haitian Flavor Industry even experienced a decline in performance. According to Wind data, in the second quarter of 2021, Haitian Flavor Industry's revenue was 5.174 billion yuan, down 9.39% year-on-year; net profit was 1.399 billion yuan, down 14.77% year-on-year; deducted non-net profit of 1.355 billion yuan, down 15.0% year-on-year.
The performance of other listed companies in the industry is also in the downturn. According to Wind data, in the first half of this year, the net profits of Haitian Flavor Industry's competitors Qianhe Flavor Industry (603027.SH) and Zhongju High-tech (600872.SH) were in decline, 65.8128 million yuan and 280 million yuan respectively, down 58.09% and 38.51% year-on-year.
"Affected by the epidemic, residents' consumption is still in a state of repair, and while the condiment industry has maintained stable development, it has also experienced a series of challenges." Haitian Flavor Industry said bluntly in the 2021 semi-annual report that the sales side has weakened consumer demand due to changes in the external economic environment. The fission of new consumption and new channels has brought new challenges and opportunities to the condiment market, and has also made consumer demand show a trend of diversified development.
In 2017, Haitian Flavor Industry acquired Zhenjiang Dan and Vinegar Industry, opening a subdivision track layout. Nowadays, Haitian Flavor Industry has gradually developed the business direction of grain and oil, hot pot base, rice and so on.
"Taking edible oil as an example, the current market pattern of the edible oil industry has been quite stable, and it is not easy for Haitian flavor industry to share the soup." Zhu Danpeng believes that the profits of the old products of Haitian Flavor Industry have encountered a ceiling, and the new tracks such as grain and oil and hot pot base materials are also relatively saturated.