Keming Noodle Industry (002661) Research Briefing: Cost reduction for four consecutive years in advance, marketing management, positive innovations and breakthroughs
Costs have been initially reduced for four consecutive years, and the integration of the industrial chain is expected to decrease for three consecutive years from 2018 to 2020.
The company has factories in Urumqi, Yanjin, Henan, Suiping, Henan, Chengdu, and East China. The factories will be built directly in the raw material plant area, which will reduce procurement and logistics costs.
In addition, self-built flour mills purchased wheat directly from wheat farmers, saving wheat traders, conversion of flour traders, saving costs such as packaging, logistics, and loading and unloading costs. The total estimated cost is 150-200 yuan / ton; flourAnd the use ratio of noodles is 1: 0.
97, which is equivalent to 1 ton of noodles.
031 tons of flour.
As a result, the cost savings per ton of noodles produced after the self-built flour mill is about 155-206 yuan.
With reference to the 2017 company annual report data, the company’s noodle products revenue in 2017 was 19.
36 trillion, sales of about 42 pounds, the average unit price is about 4600 yuan / ton, which is equivalent to an increase of 3.
47% gross profit margin.
In 2018, self-supplied flour was 50%, an increase of about 1.
24% gross 都市夜网 profit margin, self-supplied flour 75% in 2019, and then increase by about 0.
12% gross profit margin, 100% self-supplied flour in 2020, and then increase by about 0.
12% gross profit margin.
Therefore, the integration of the industrial chain is expected to reduce the company’s procurement costs for three consecutive years from 2018 to 2020.
The factory in East China Bonded Zone is expected to be completed in 2020, and the reduction in costs caused by the tariff difference between imported wheat and domestic wheat is expected to be reflected after 2021.
The East China factory built in the bonded area mainly uses Australian wheat.
According to wind data, the price of imported wheat is much cheaper than that of domestic wheat (the price difference is about 30%), and the factories built in the bonded area do not need to pay tariffs and substitutions, but import food into the customs and only need to explain the tariffIn general, it is expected that the price difference between imported wheat and domestic wheat will still be able to withstand a surplus after excluding food tariffs.
Others such as the highest spread arbitrage of wheat and the increased efficiency of new factory automation have both reduced costs and increased profits.
The reduction in the overall costs of the above companies is expected to bring benefits to the company: First, the existing mid-to-high-end noodles have a higher gross profit margin and improved profitability; second, they can comprehensively launch low- and mid-end products, covering urban-rural junctions, counties and belowMarket, thereby greatly increasing the sales scale, reducing the period expense ratio, and improving profitability.
Marketing management actively innovates and breaks through. (1) Outstanding selling points of products The company makes strict distinctions in packaging according to sub-brand grades and different category characteristics, highlighting the selling points of products, so that consumers can see at a glance and make better choices.
For example: A.
Ultra-high-end “bitter buckwheat noodles, oatmeal noodles, and children’s noodles” advocate the health concept of “good raw materials and good nutrition”; B.
High-end “Huaxia side” advocates “100% imported high-quality wheat, high temperature technology”; C.
Mid-to-high-end “Chen Keming” is classified according to its original taste, smoothness, flexibility, and high tendons; D.
The middle end is divided according to physical shape such as “round, fine, wide”.
Aiming at the rural market of towns and villages, the low-end “Laiwanmen” brand was launched.
At present, according to market research, there is also a gap in the sales rate of products, and the single store revenue has increased, which has contributed to the company’s increased revenue and profits.
(2) Strengthen brand promotion on TV programs and high-speed rail. In addition to good quality, it is also important to strengthen brand promotion and increase consumer awareness.
Keming noodle industry has been relatively recognized in the past for product quality and product research and development work, but less on brand promotion.
Since the second half of 2018, the company has actively recognized brand communication and promotion.
First of all, in December 2018, the ninth TV show titled “Chen Keming” on Jiangsu TV ‘s “If You Are the One” program, the audience for the “Do Not Disturb” program is mainly middle-aged and older women over 40 years old.By.
On average, starting in January 2019, the company also named the “Chen Keming” brand on six high-speed rail lines.
At the peak of the Spring Festival, Keming Noodle Industry began to participate in its “Chen Keming” brand, and the “Wugu Dojo” brand landed on the high-speed rail, passing warm-hearted greetings to hundreds of millions of passengers.
The high-speed rail has a large passenger flow, and the customer income level is relatively high, which is expected to be helpful for the promotion and positioning of “Chen Keming” noodles and “Wugu Dojo” instant noodles.
(3) The management is more refined, and the quantitative evaluation is upgraded to the internal management of “Amoeba” management in each business unit company. The quantitative evaluation is performed in each business unit, and the internal settlement price is used for settlement.
In this way, the company knows that every penny the company makes comes from that business unit.
The person in charge of each business unit is also very aware of the performance contribution of the business unit, and the brakes better increase revenue and control costs reasonably.
In marketing, the efficiency of after-sales service has been significantly improved.
The Air Force, long-term business contracts to dealers are mostly formal relationships, without clear responsibilities and obligations.
Beginning in 2019, the sales tasks and rewards specified in the sales contract will be strictly calculated and settled in accordance with detailed indicators such as monthly completion rate, quarterly completion rate, and annual completion rate.
At the same time, the rebate settlement time is clearly specified in the contract, and the completion is supervised by the person in charge of each business area, and the company management assessment is performed at the same time.
As a result, the responsibilities and goals of dealers and sales staff are more clear.
The improvement of after-sales service is beneficial to the dealers’ enthusiasm is significantly increased, and more benefits are put into the market.
Wugu Dojo is expected to have at least a break-even in 2019. Wugu Dojo has a high brand awareness in the history of noodles. Noodles are more vigorous and have a differentiated competitive advantage.
Considering the cost of logistics, the company will focus on expanding the market around the factory, with Henan and Shandong markets in the early stage, and then expand in Beijing, Tianjin, Hebei and Shenzhen.
After the Wujin Dojo Yanjin Plant is put into operation, costs can be reduced significantly.
First, the instant noodle factory was built near the flour mill, and the self-supply of flour saved the cost of raw materials. Second, under the coordination of the channel, it was matched with the noodle sales. The instant noodles were “thrown” and the bottom noodles were “heavy.”The problem that the upper level of the cargo cannot be too high during transportation (inadequate weight and sufficient volume), thereby reducing the unit logistics cost.
In our judgment, Wugu Dojo is expected to achieve at least a break-even or slightly profit in 2019.
Earnings forecast and investment rating: Maintain Buy rating.
The company’s EPS for 2018/19/20 is predicted to be 0.
16 yuan, corresponding to PE for 2018/19/20 is 25.
36 times, maintain “Buy” rating.
Risk reminders: The construction period of self-built flour mills or the self-sufficiency rate of flour is not up to expectations; market development of lower-end and lower-end products is less than expected; marketing management reforms are not as expected; sales of grain dojos are less than expected; the risk of liquidation of mortgages by major shareholders;