Shun Xin Agriculture (000860): Liquor business advantages and growth logic remain clear

Shun Xin Agriculture (000860): Liquor business advantages and growth logic remain clear
Performance review maintains that the industry’s 3Q19 results outperformed our expectations of the company’s 3Q19 results: single third quarter operating income26.46 trillion, an increase of 34 in ten years.3%; net profit attributable to mother 0.170,000 yuan, corresponding to a profit of 0.022 yuan, 69 in the past ten years.7%.  Revenue growth in the third quarter alone exceeded our expectations, but from 28.Looking at the gross profit margin of 8%, we believe that the company’s growth quality is poor, and we expect the rapid growth of non-baijiu business will weigh on revenue quality.In addition, we believe that the listed company accrued additional expenses in the third quarter, which resulted in a decline in profitability. The overlap of the third quarter was the off-season of the company’s liquor business, which caused the net profit margin to significantly exceed our expectations.  Development Trends We believe that the company’s liquor business advantages and growth logic have not changed, and the company’s fundamentals are not disturbed by quarterly results.We believe that the liquor business is expected to maintain 17% revenue growth in 2019, with sales volume reaching 66.6.We believe that the core reason for the decline in the growth rate of liquor business is the base conversion brought by the high growth in 2018, and at the same time, the high-priced light bottle wine is still in its infancy.We expect the company’s revenue growth in the next three years to bring higher quality profitability.  The core of the company’s new growth strategy is 35?The nationalization of products at the price of 50 yuan, according to our market survey, has made breakthroughs in East China, Beijing and other places, and is promoting nationalization. We expect the company’s revenue growth rate to remain at 15 in 2020/21?20%.The core business advantage of the company is the national brand advantage of Niulanshan liquor and the established channel network, which will further expand and promote the company.A 50 yuan cost-effective product lays the foundation for substitution.  In terms of resource integration and external dealer cooperation, we believe that the company’s philosophy leads the industry.We believe that the logic 上海夜网论坛 of industry integration is the comprehensive competition in terms of product cost performance, brand and channel capabilities. The company has achieved indicators through the integration of foreign base wine professional resources and light assets. At the same time, it can fully exert market value through the specialized operation of distributors.  Earnings forecasts and estimates are based on the amortization of expenses in the third quarter and the rapid growth of non-baijiu business. We lower our net profit for 2019/202014.5% / 16% to 10.61 ppm / 15.One million yuan.  Currently corresponds to 2019/2020 32.0 times / 22.7 times price-earnings ratio.  We maintain our Outperform rating, but we lower our target price by 15 as we lower our 2020 profit forecast.5% to 71.00 yuan, corresponding to 49.6 times 2019 P / E ratio and 35.2 times the 2020 price-earnings ratio, 55 compared with the current period.1% upside.  Risks If the company cannot adhere to the product’s cost-effective model, it is difficult to upgrade further.