The current situation of the condiment industry chain: the prices of soy sauce and fuel consumption have risen, cooking wine may be the next big single product

Chinese people love to cook, so oil, salt, sauce and vinegar are naturally indispensable. In the condiment industry, Haitian Flavor (603288.SH) is an investment target that cannot be bypassed.

On January 8 this year, Haitian Flavours ushered in the historical peak of 7 years of listing. The highest stock price reached 219 yuan, and the intraday market value was as high as 900 billion yuan, ranking third in the A-share consumer goods industry after Kweichow Moutai and Wuliangye. Haitian flavor industry is also jokingly called "soy sauce grass."


     But after the highlight, it fell for 9 months, and almost cut in half at the lowest point. Haitian Flavour Industry, which enjoys the reputation of "Moutai in the Soy Sauce World", has not been wearing this heavy crown.

     Soy sauce grass suddenly no longer fragrant


     In the 2021 semi-annual report of Haitian Flavor Industry, its revenue reached 12.332 billion yuan, the net profit attributable to the parent was 3.353 billion yuan, and the net profit attributable to the parent after deduction was 3.25 billion yuan. The three major indicators all increased slightly by more than 3%.


     But in the second quarter, Haitian Flavour Industry actually encountered Waterloo.Looking at the second quarter alone, Haitian Flavor's operating income was 5.174 billion yuan, down 9.39% year-on-year; net profit attributable to the parent was 1.399 billion yuan, down 14.68% year-on-year; net profit attributable to the parent after deduction was 1.355 billion yuan, down 15% year-on-year .


     This is the first single-quarter performance decline of Haitian Flavour since its listing. At the same time, this is also the lowest growth rate of Haitian Flavour in the mid-term reporting period since its listing in 2014.


     In addition, in the first half of this year, Haitian Flavor's net operating cash flow was 254 million yuan, a sharp drop of 83.85% from the 1.570 billion yuan in the same period last year, and dropped to the lowest level in the past five years.


    "Soy sauce Mao" suddenly became less fragrant.


      In fact, the entire industry is declining in 2021. For example, the semi-annual reports issued by Haitian Flavour's rivals Qianhe Flavour, Zhongju Hi-tech, and Hengshun Vinegar Industry show that the net profit attributable to the mother in the first half of the year fell 58.09%, 38.51%, and 14.62% year-on-year, respectively.


      2020 is a special year. In the face of a sudden epidemic, ordinary people can only cook at home with peace of mind. In 2021, the seasoning giants will face the pressure of rising raw material prices.


      Haitian Flavour Industry once publicly stated: “The prices of upstream materials have continued to rise this year, and the production costs of enterprises are facing greater operating pressure, and the profits of the industry have been squeezed.”


      Data show that the price of soybeans, the raw material for soy sauce, is rising. In the first half of the year, the spot price of soybeans reached 5,443 CNY/ton, up 30% year-on-year, and the average current price of soybeans increased 17% year-on-year. Cost increases have become an inevitable risk.

From the perspective of cost structure, more than 80% of the cost of soy sauce products of these companies are derived from raw materials (soybeans, soybean meal and packaging materials), and the cost of raw materials has been on a continuous upward trend since 2020.

      At the same time, the price trend of packaging materials has surpassed the highest level since April 2017, and the upward pressure on these costs is exerting huge pressure on the production side of soy sauce companies.

      The same industry giant Qianhe Flavour Industry also stated that the price increase of soybeans, packaging materials and other commodities in the upstream of the industrial chain may continue, which will continue to pose challenges to the business efficiency of the company, and greatly test the flexibility of the company's ability to respond and cost digestion.

      Obviously, cost pressure and inventory pressure are short-term disturbances, leading to a decline in corporate performance.