China Torch High-tech (600872): Focusing on fundamentals is expected to move into the fast lane

China Torch High-tech (600872): Focusing on fundamentals is expected to move into the fast lane

Event: The company issued an announcement. 1) A wholly-owned subsidiary, Meixian, received a “Judgment” regarding the transfer agreement of the property rights of Kitchen State. The arbitration confirmed that Kitchen State’s equity transfer agreement did not have legal effect.The 80% and 20% shareholdings of Kitchen State remain unchanged; 2) The board of directors has decided to remove Mr. Zhang Weihua from the position of deputy general manager, mainly due to the serious misconduct of Mr. Zhang Weihua during the acquisition of minority shareholders’ interests by Delicious Fresh.

The company stated that it will strive to solve the problem of the small shareholders of Kitchen State in the future.

In the first three quarters of 2019, the net profit growth rate of Yangxi Kitchenbond Co., Ltd. reached 4.

52% lower than delicious fresh whole (19.

08%), we believe that part of the reason lies in the issue of small shareholders, which can resolve the company’s determination to solve the problem. The company also stated that it will try to solve the problem of the small shareholders of Kitchen State through means including but not reorganizing and resorting to law.It is believed that the resumption of equity can still be expected.

“Strengthen group management”, promote operation efficiency.

In the early stage of the company’s development, the operating efficiency, employee compensation and incentive levels were lower than their peers. Baoneng, a major shareholder, planned to achieve “strong group management” through unified management of personnel, procurement, and sales, combined with equity incentives, and KPI adjustments.The team’s execution is stronger, and the operating efficiency is improved.

2019 is a year of adjustment for Baoneng. We still see positive changes. The company plans to achieve revenue / sales of tens of billions in 2023, 19% growth in 2018-2023, and accelerated acceleration in 2020.

Channel sinking is appropriately accelerated: through, according to grassroots research, the company actively develops county-level cities through the development of two batches of distributors as distributors, with a total net increase of 145 dealers in Q1-Q3, while developing blank markets in the north, central and western regions, Q1-Q3 revenue increased by 18.

7% / 26%, reconstruction. This 重庆耍耍网 year, through re-contracts, changes in sales policies and incentive mechanisms, it will stimulate dealers and sales enthusiasm. At the same time, it plans to increase the audit requirements in the sales contract in the later stage (the dealer management is looser in the early stage) and increase the distribution every year300 dealers (an increase of 145 in Q1-Q3 this year), and strive to stabilize the channel and make progress, and accelerate appropriately.

Catering channel development is good: Since this year, the company has increased the promotion of the catering channel. It has established offline flagship restaurants and circulation flagship stores with good results, and its average revenue has increased by more than 30%. At the same time, it is planned to require business personnel to take on the role of developing catering customersResponsibility (currently only managing distributors).

The reserve capacity is abundant and many categories are blooming: the company ‘s Yangxi Delicious Fresh Factory put into production edible oil production capacity of about 10 seconds in the last November, and other categories of vinegar / cooking wine / fuel consumption are in the state of sales and production.Over 120 mm, the platform layout gradually formed.

Investment suggestion: Regardless of the recovery of minority shareholders’ equity, it is expected that the returns for 2019-2021 will be 0.

86 yuan, 1.

12 yuan, 1.

32 yuan, giving a 6-month target price of 49.

04 yuan, equivalent to 42 times the estimate of the condiment plate, maintaining the buy-A grade.

Risk warning: risks of turbulent corporate governance and increased competition in the industry.