Anhui Guying Distillery, Maintaining a main role in Anhui Province.
- Guying announces that its FY20 income barely declined via 1% yoy to Rmb10.3bn, and that internet earnings dropped by means of 12% yoy to Rmb1.86bn, 7% beneath our estimate, owing to a slower healing in its domestic market, Anhui province, owing to the COVID-19 outbreak.
- 1Q21 sales grew via 26% yoy to Rmb4.1bn, up 13% over that in 1Q19, and internet profit rose with the aid of 28% yoy to Rmb814m, under our expectation, as the cross-province travel restrictions for CNY decreased the range of Anhui migrant employees going domestic for the holidays, and affected baijiu consumption in Anhui province.
- We now assume the Company’s income to grow with the aid of 17% yoy, with internet income up with the aid of 31% yoy, pushed through the multiplied income contribution of high-end manufacturers and robust sales
Growth in backyard markets.
Better recuperation than different Anhui baijiu groups in 2020 Guying’s domestic market, Anhui province, has one of the greatest corporations of migrant workers. The COVID-19 scenario no longer solely affected the migrant employees going out to work to a certain extent, however additionally impacted the baijiu consumption improve tempo in Anhui province in 2020. So, the Company’s income in the central China market, which includes its domestic market, Anhui province, Henan and Hebei, declined through 3% yoy to Rmb9bn in FY20, accounting for 88% of whole income (FY19: 90%). The GPM for the central China market dropped by 2.4% pts to 75.5%.
In the backyard markets, the Company finished wonderful income growth in FY20. Sales in the north and south China markets grew by means of 24% and 11% yoy, accounting for 7% and 6% of complete sales, respectively. The GPM for the north and south China markets expanded by using 5.8% pts and 7% pts to 72.7% and 74.3%, respectively. In FY20, in contrast with different listed Anhui baijiu companies, such as the second-largest baijiu employer in the Anhui market, Kouki’s 14% income decline, and the third-largest, Yingjie’s 9% income drop, Guying coped nicely with the pandemic and outperformed them. Improved contribution from high-end Cellar manufacturer sales.
The Company’s product shape premiumization persevered in FY20. Sales of the Cellar Age manufacturer grew by means of 6.5% yoy to Rmb42.6bn with 4% quantity boom and a 2% ASP increase, and its income contribution elevated from 71% in FY19 to 76% in FY20. Sales of the Guying company declined by way of 4% yoy to Rmb1.4bn, with 7.6% extent boom and an 11% ASP decline, accounting for 13% of whole sales.
The Company’s standard GPM in FY20 dropped by using 1.5% pts to 75.2%, owing to 1) transportation prices being moved from Sample expenses to COGS, 2) a product shape alternate due to the COVID-19 impact, and 3) more reductions to distributors for destocking. The Sample fees ratio rose with the aid of 1% pt. to 38.5%, broadly speaking due to the fact worker compensation rose through 34% yoy, with the variety of sales human beings and researchers each increasing. The NPM dropped through 2.1% pts to 18% in FY20.
The Company actively extended its distribution coverage, and brought an internet 437 new distributors to 3,383 in complete as at end-FY20. NPM anticipated to return to the regular degree in 2021 In 1Q21, the Company’s usual GPM remained flattish yoy at 77%, however 1.8% pts better than that in FY20. We suppose consciousness of the high-end Cellar Age company has consistently strengthened in the backyard markets, and the manufacturer emphasizes years of storage to cater for the contemporary baijiu market’s pursuit of antique baijiu.
Along with the multiplied income contribution from the Cellar Age brand, we anticipate the Company’s GPM to proceed to increase. The Sample prices ratio declined by means of 0.9% pt. to 35.4% in 1Q21, and the NPM rose barely through 0.3% pt. to 19.7% in 1Q21.
We assume the advertising funding in its domestic market and outdoor new markets to progressively extend in the subsequent few quarters in FY21F and forecast that the NPM will get better to the everyday stage of 20.2% in FY21F.