【行业研究报告】伊利股份-Promotional expense on Winter Olympics could weigh on 4Q results

PLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGEPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGEMOREREPORTSFROMBLOOMBERG:RESPCMBRORhttp://www.cmbi.com.hkChinaConsumerStaplesJosephWong(852)39000838josephwong@cmbi.com.hkStockDataMktCap(RMBmn)252,165Avg3mthst/o(RMBmn)2,53052wHigh/Low(RMB)48.9/30.9TotalIssuedShares(mn)6,400Source:BloombergShareholdingStructureHKSCC12.3%HuheHaoteInvestment8.9%PanGang4.7%Source:HKExSharePerformanceAbsoluteRelative1-mth-7.0%-4.4%3-mth-1.2%2.3%6-mth15.5%22.8%Source:Bloomberg12-mthPricePerformanceSource:Bloomberg1.“Cherry-pickingamidade-riskingmentality;ourtoppicks:CRB/Mengniu/Feihe”–21Jan20222.“Marketingfeedback–inflation&pricehikesarekeywordsappearedineverymeeting”–23Nov20213.“Structuralmeritslookprominentamidtransitionalheadwindandanystagflationexpectation”–2Nov20210.010.020.030.040.050.060.0Jan-21Apr-21Jul-21Oct-21600887CHSHSZ300(rebased)(RMB)BUY(Maintain)TargetPriceRMB46.5(PreviousTPRMB50.0)Up/Downside+18.0%CurrentPriceRMB39.4125Jan2022Wetrimour2021Enetprofitsby1.5%toRMB8,902mnsubsequenttoourincorporationofa0.9pphigheropexratio(of28.7%)for4Q21duetoanypromotionalexpensefortheWinterOlympics.Inotherwords,weloweredour4Q21EnetprofitestimatetoRMB958mnwhichisnowabout2%belowconsensus.Meanwhile,weleaveour2021Etoplinelargelyunchanged,asweexpect4Qshipmentgrowth(+11.6%YoY)tosequentiallyimprovefrom8.6%in3Q.Weextrapolatedourrevisedforecasts,andassuchwecut~4%ofour2022EnetprofitswhichexplainedourloweredTPofRMB46.5(fromRMB50.0).Wearebuy-rated,butwepreferCRBeer(291HK,Buy)andMengniu(2319HK,Buy)withinourChinaConsumerStaplescoverageuniverseforapotentiallylowerearningsvolatilityintotheresultseasons.Asteady4Qtopline.Salesinliquidmilkimprovedvs3Q21whenIMFcontinuedtotrackstrongly.BasedonNielsendata,Yili’smarketshareinIMFexpanded1.6pptYoYto7.1%inNov2021,despiteregionaloutbreaksinthecountryduringthequarter.Lowtempmilkrecordedsteadytoplinegrowthinthequarterbuthasnotyetbrokeneven,whichisacommonsituationfacedbythesectoratthecurrentstage,givenstilllimitedscale,highcoldchainlogisticcost,andtheneedoftimetogrowconsumerhabits.4Q21marginsstillunderpresssure.4Q21marginswentunderrelativelyhighpressurecomparedto3Q21,duetoastill-highrawmilkpriceandahighersellingexpenseratio,largelyduetoincreasedadvertisingcampaignsincludingthoseforWinterOlympics.Itisunlikely,inourview,toseesignificantreductioninsellingexpenseratiointheneartermasthecompanyplanstokeepinvestinginemergingcategoriessuchasIMF,lowtempmilk,cheese.Managementexpectedfull-yearNPMtoimprovebyabout0.5pptYoY.Valuation.OurTPisbasedonanupdated28.5x(from29.0x)end-22EP/Ewhichstillrepresents+1sdaboveits3-yearaverage.Inourview,ourmethodologyreflectsYili’ssolidgrowthroadmapwhichlikelymanifestsintoaguidedapproximately0.5pptmarginsexpansionperannum.EarningsSummary(YE31Dec)FY19AFY20AFY21EFY22EFY23ERevenue(RMBmn)90,22396,886110,813125,929140,856YoYgrowth(%)13.47.414.413.611.9Netincome(RMBmn)6,9347,0788,90210,64812,734EPS(RMB)1.11.21.51.62.0YoYgrowth(%)11.62.025.811.719.7ConsensusEPS(RMB)n.an.a1.51.62.0P/E(x)n.an.a27.024.120.2P/B(x)n.an.a7.36.66.0Yield(%)n.an.a2.83.13.7ROE(%)24.922.027.329.132.0Netgearing(%)netcash1.37.65.72.5Source:Companydata,Bloomberg,CMBISestimates