Slow performance and unfavorable market expansion

Recently, the A-share market has continued to fluctuate and the market index has corrected. Since the dividend of Taoli bread on May 11, the stock has also been in a downward trend, and the current stock price has fallen below 30 yuan / share. By July 26, its shares continued to fall by 1.34% and quoted 28.80 yuan / share. For the downward trend of share price, it has no measures to boost the secondary market.

At the same time, Taoli bread disclosed that the interim performance express of 2021 showed that its performance was poor and its net profit decreased significantly. It explained that the decline in performance in the first half of this year was due to the lower cost in the current period due to the impact of the national phased social security relief policy in the same period last year; Last year, due to the epidemic, the promotion expenses were reduced, and the return rate and discount rate were low.

In other words, Taoli bread believes that the decline in performance in the first half of this year is due to the high performance base in the same period last year. However, the daily financial report found that if only from the perspective of products, the income growth of the main industry of peach and plum bread is weak, and the growth rate has slowed down year by year. Facing the slowdown in performance, it has been trying to open the southern market, but at present, the market expansion is poor, and the southern subsidiaries generally lose money.

Revenue growth fell to single digits, and the subsequent growth may continue to slow down

According to the published performance express of Taoli bread, its revenue in the middle of 2021 will be 2.939 billion yuan, a year-on-year increase of 7.32%; The attributable net profit was 369 million yuan, a year-on-year decrease of 11.57%; The net profit of non deduction was RMB 335 million, a year-on-year decrease of 14.38%.

The performance of Taoli bread has fallen into the situation of “increasing income without increasing profit”, and the high net profit base in 2020 is indeed one of the reasons. The performance of most listed companies was impacted by the epidemic in 2020, but the epidemic was a great benefit for peach and plum bread.

Under the epidemic situation, consumers’ demand for bread increases. At the same time, peach and plum bread can also save a promotion cost, and the return rate and discount rate are relatively low. However, the epidemic is a sudden event and is not sustainable. The positive impact on peach and plum bread is limited to 2020. By 2021, the domestic epidemic situation will be controlled, the injection rate of Xinguan vaccine will increase steadily, and its performance growth will be “back to the prototype”.

Although Taoli bread attributed the decline in performance in 2021 to the high performance base in 2020, if 2020 is excluded and only 2019 is compared, it can be found that the slowdown in performance growth has already occurred. In the middle of 2021, its attributable net profit was 369 million yuan, an increase of about 21.63% over 303.7 million yuan in the middle of 2019. It should be noted that in two years, the growth rate of 21.63% is not high.

From a business perspective, the revenue of the main industry of peach and plum bread also continued to slow down. According to the calculation of the daily financial report, from 2018 to 2020, its food production business achieved revenue of RMB 4.833 billion, RMB 5.644 billion and RMB 5.963 billion respectively, with growth rates of 18.46%, 16.78% and 5.65% respectively.

Under the epidemic situation in 2020, the market demand for bread increased, which played a good role in boosting the performance of peach and plum bread, but the growth rate of main business revenue was only 5.65%. In the main food production industry, if we continue to exclude moon cakes, zongzi and other products with a relatively low proportion, and only calculate bread and pastry products, we will find that the revenue growth rate is also in single digits. In 2020, its bread and pastry products achieved a revenue of 5.837 billion yuan, an increase of 5.61% over 5.527 billion yuan in 2019.

After Taoli bread released its 2021 interim performance express, many institutions also predicted its annual performance. In the meantime, Minsheng securities is optimistic about it. It is predicted that the attributable net profit will increase by 11.10% year-on-year in 2021, while Dongfang securities, Southwest Securities and Hua’an securities predict that the growth rate of attributable net profit will be single digits, 1.5%, 6.39% and 3.74% respectively. In other words, it is more likely that its performance growth will continue to slow down in 2021.

The expansion of the southern market was unfavorable, and many subsidiaries fell into losses

In the above data, taking the development of the main food industry as the reference object, the advantage is that other influencing factors can be eliminated and only the scale growth of the main industry can be considered. In recent years, the growth rate of the main industry of peach and plum bread has continued to slow down and encountered a growth bottleneck. In fact, the unfavorable expansion of market scale is an important reason for its bottleneck.

Taoli bread, founded in 1997 by retired teacher Wu Zhigang, has been deeply cultivated in Northeast China for more than 20 years. Since the national market expansion in 2015, the northeast, North China and East China have contributed the main revenue, while the southwest, South China, northwest and central China have contributed relatively low revenue.

(source: flush Ifind)

Peach and plum bread was deployed in Northeast and North China earlier, seizing the market development dividend and having a high market share. However, in recent years, the markets in Northeast and North China are gradually saturated and the market scale is limited. In addition, it entered South China, central China, East China and other regions late, with more bread manufacturers and greater competitiveness. Especially in the southern market, its subsidiaries generally lost money, which also reflects the setback of the expansion of the southern market.

(source: Orient Securities)

According to the statistics of the daily financial report, by the end of 2020, Taoli bread had a total of 37 major equity holding subsidiaries, including 17 loss making subsidiaries, which are generally located in the south. There are seven subsidiaries with a loss of more than 5 million yuan, located in Shenzhen, Shanghai, Nanchang, Jiangsu, Xiamen, Hainan and Fuzhou.

(source: 2020 annual report, compiled by daily financial report)

It is worth noting that Nanchang subsidiary was cancelled in November 2020 on the grounds of “optimizing resource allocation and asset structure, reducing management costs and improving operation and management efficiency”.

In addition, the products of peach and plum bread have obvious staple food attributes, which are suitable for pasta, especially in areas where bread is the staple food. However, the eating habits in southern areas are different, and bread is more used as breakfast. The southern breakfast prefers hot food, such as steamed stuffed buns. You can refer to Barbie food, the “first share of steamed stuffed buns” made in Shanghai, while peach and plum bread lost 6.5362 million yuan in Shanghai.

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