In 2021, Haitian will meet the performance test. From condiments to hot pot bottoms, can Haitian flavours sweep all opponents

Counting the big bull stocks in the past year, Haitian Flavour Industry will surely have a place.
The increase of more than 125% in 2020 will make it a star target comparable to Kweichow Moutai.

At the beginning of the new year, Baotuan stocks saw a wave of concentrated slump, and the share price of Haitian Flavour also fell by nearly 30%.

Investors began to suspect that the stock price of Haitian Flavour had peaked.
However, after the 2020 annual report was announced on March 30, Haitian impressed investors with its outstanding performance, and its stock price rose continuously.

Haitian flavor industry's rising logic is simple-based on the certainty of performance growth.
In the past five years, Haitian Flavor Industry’s net profit increased from 2.
84 billion yuan in 2016 to 6.
403 billion yuan, with a compound annual growth rate of 22%.
For large funds, the certainty of performance growth is one of the most important indicators.
.

As the aircraft carrier of China's condiment industry, the value of Haitian Flavour Industry needless to say, but no matter how good the target is, it is difficult to break away from the shackles of valuation.

From the perspective of value analysis, Haitian Flavour’s P/E ratio of over 80 times is no longer cheap.

If the company wants to continue to maintain its share price, it must be based on the continuation of previous performance growth.
If growth stalls, it is very likely to trigger Dai Weiss double play.

Judging from the latest strategy of Haitian Flavour, new business expansion has become a bet for Haitian's future performance.

Starting in the second half of 2020, Haitian has successively entered the two major fields of hot pot bottom materials and edible oil, but these two fields have been extremely mature and can be described as giants waiting for them.
Can Haitian flavour industry successfully break out of them? Can the hot pot bottom material really support the future of Haitian? This year may be the key to everything.

01Open the third growth logic

01Open the third growth logic

Haitian Flavour Industry is the absolute leader in China's condiment industry, ranking first in condiment production and sales and revenue for many years.

The company's products cover soy sauce, oyster sauce, sauce, vinegar, chicken essence, monosodium glutamate, cooking wine and other categories.

From the analysis of revenue category, the revenue of Haitian Flavour Industry is mainly composed of three businesses of soy sauce, seasoning sauce, and oyster sauce.

Other products have less revenue and are classified as other businesses.

Looking at Haitian Flavor’s financial report before 2020, it can be found that Haitian’s performance growth has two main logics.

One is the growth brought about by the increase in volume and price of the traditional soy sauce business; the second is the growth brought about by the sudden increase in oyster sauce business.

After the announcement of the 2020 annual report, the rapid growth of new business has enabled Haitian Flavour Industry to open the third pole of performance growth.

Let's first analyze the first growth logic brought by the soy sauce business.

In fact, the growth of the soy sauce business can be roughly divided into two stages: product upgrade period (2013-2017) and heavy volume growth period (2017 to present).

From the perspective of gross profit margin, from 2013 to 2017, Haitian's soy sauce business was always in the product upgrade stage.

The gross profit margin increased from 40.
6% to 49.
5%, which became the key to the increase in gross profit.
Product upgrades have made consumers willing to spend more expensive prices to purchase products.

Beginning in 2017, although the gross profit margin of Haitian's soy sauce business has also increased, the overall increase has been modest and has stabilized at around 50%.
On the other hand, the continuous growth of sales has driven Haitian's revenue and gross profit to climb, and has promoted the continuation of Haitian's core growth logic.

While the soy sauce business has increased in volume, Haitian’s oyster sauce business has become a new growth point, with sales nearly doubling from 484,800 tons in 2017 to 862,500 tons.
Oyster sauce has become a substitute for MSG to a certain extent.
The increase in industry penetration brought about by this substitution constitutes the second growth logic of Haitian Flavour Industry.

With the successive entry into the two emerging fields of hot pot bottom materials and edible oil, Haitian Flavour's other businesses will account for 13.
7% of total revenue in 2020, a year-on-year growth rate of more than 30%, which is the fastest growth rate among all businesses.
Fast.

From a data perspective, in the past three years, other businesses have always been the fastest-growing business of Haitian Flavor Industry, but the growth rate of other businesses will increase again in 2020.

In 2020, other businesses will contribute a gross profit of 863 million yuan to Haitian Flavor Industry.
With the future volume of the hot pot base and edible oil business, the growth rate and proportion of other businesses may continue to grow.

Obviously, considering only the performance in 2020, Haitian Flavour's innovative business is relatively successful, and Haitian Flavour's sales expenses have not risen but dropped, from 2.
163 billion yuan to 1.
366 billion yuan in the future.
There is still a lot of room for marketing and promotion.
The continuous enrichment of diversified products has become the third pole of Haitian flavor industry's growth.

02Amplified growth

02Amplified growth

Compared with the paper data of the financial report, the actual operation of the commercial battlefield responds to the fundamentals, which is often more real.

In the extreme case of the epidemic attack last year, the leading effect of Haitian Flavour Industry was actually magnified.
When the epidemic subsided, we had reservations about Haitian’s ability to continue to grow at a high level of innovative business.

In fact, the first two growth logics of Haitian Flavor Industry have been verified for a long time, and from the perspective of other industries, these two logics are basically established.

Focusing on the first growth logic, improving the quality of the soy sauce business is the general trend.
In the process of industrialization of soy sauce, in order to improve production efficiency, it is a common practice to add sodium glutamate to soy sauce.
And the taste of soy sauce was single, and people's demand at that time was still simple pragmatism.

However, as the consumption power of the Chinese people has improved, the needs of consumers have also begun to change.
There are two major upgrade directions: one is the original soy sauce without sodium glutamate, and the other is a variety of seasoned soy sauces with more functions.

Consumers have always debated whether the original brewed soy sauce is an IQ tax.
This point can actually refer to the development of the wine industry.
Both blended wines and brewed wines used to be good for consumers, but with the advancement of consumption upgrades, blended wines have gradually lost the high-end market.

But is blended wine really worse than brewed wine? This is a question of different opinions, but one thing is certain, some consumers are willing to pay a premium for the time cost of brewing.
Similarly, in fact, the original brewed soy sauce has the same logic.

On the other hand, the emergence of various functional soy sauces has also met the different needs of consumers.
Various categories such as straw mushroom soy sauce, fresh noodles, and braised soy sauce have significantly increased consumers' investment in soy sauce.

The second growth logic is actually not difficult to understand.
The growth of the oyster sauce business is the result of increased penetration.
Compared with the nearly 100% penetration rate of traditional categories such as soy sauce and vinegar, the penetration rate of oyster sauce is only about 25%, which has great room for growth.

According to industry association data, in 2018, the growth rate of aquatic condiments represented by oyster sauce reached 17%, the growth rate of the soy sauce industry reached 8%, and the growth rate of the monosodium glutamate industry was -5%.
Oyster sauce is replacing MSG as an important choice for consumers.

In contrast to the first two more mature growth logics, the logic of the third pole of Haitian flavor industry growth is not so smooth.
The offline channel has always been Haitian's core advantage, but this advantage may not be transformed into a new business victory.

According to the financial report, as of the end of 2020, Haitian flavor industry has a total of 7,051 distributors, a net increase of 1,245 compared to 2019.
At present, Haitian Flavor Industry has established a comprehensive and three-dimensional sales network covering 31 provincial-level administrative regions, more than 320 prefecture-level cities, and more than 2,000 county-level markets across the country, with almost 100% coverage.

A strong offline channel is the key to Haitian Flavour Industry's growth in 2020.
Statistics show that Haitian’s distribution model generates revenue of 21.
631 billion yuan, accounting for 94.
9% of total revenue.
Although affected by the epidemic, the gross profit margin of the distribution model fell by 3.
71 percentage points year-on-year, but the 15.
29% revenue growth was still sufficient to drive the company's overall growth.

Especially when the epidemic raided, the catering and other industries have not fully recovered to the level before the epidemic, which affected Haitian's B-side business.
Thanks to its strong offline advantages, Haitian Flavour Industry has been able to maintain growth despite the sharp drop in marketing expenses.

From the perspective of gross profit margin, the gross profit margin of Haitian's other businesses hit a record low of 27.
7% in 2020.
The increase in sales seems to be driven by low prices.
Under the epidemic situation, most players in the industry choose to tighten their clothes and food, which further magnifies the channel advantages of Haitian Flavour Industry.

However, with the recovery of the epidemic, other players in the industry have also begun to implement aggressive strategies, which has caused Haitian's channel advantages to be compressed to a certain extent.

Judging from the recent variety shows sponsored by Haitian Hot Pot Base, Haitian Flavor Industry has begun to exert its efforts in marketing and promotion, and marketing expenses will inevitably increase.

When the low-margin market grabbing strategy is superimposed on marketing, can Haitian Flavor Industry still maintain its previous high growth in performance?

03 Haitian Crossing Tribulation?

03 Haitian Crossing Tribulation?

Relying on its strong channel advantages, Haitian has established a broad moat, giving it a leading advantage in the soy sauce industry that other competitors cannot surpass.

On the basis of the huge channel moat, Haitian Flavour Industry implements a diversified strategy, which is to increase the stickiness of consumers through channel advantages and allow them to buy more Haitian products.
However, judging from the development of the past two main products, seasoning sauce and oyster sauce, it seems that the answer is not so certain.

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