证券研究报告 2018年9月17日 | 7:36PM CSTpg.jrj.com.cn/acc/Res/CN_RES/INDUS/2018/9/17/9e9d2c1d-de...2018/09/17 · 世界各国的调味品都有自身独到的口味，而中国调味品市场的独特之处在于不仅拥有

世界各国的调味品都有自身独到的口味，而中国调味品市场的独特之处在于不仅拥有

总计170亿美元的庞大规模，且在高端化、品类扩张和行业整合的推动下增速接近两

位数。此外，中国调味品行业从以下方面来看与许多其他消费品品类有所不同：

消费者对产品均价的敏感度较低，因购买频率低（普通消费者每月购买一次调味1.

品）；品牌偏好更稳定（餐饮渠道调味品消费量占比为55%，且通常采购同一品

牌）。

准入门槛高、竞争格局明朗：中国传统调味品的本土特色较强，这为跨国企业设2.

置了准入门槛。尽管市场分散度仍较高，但海天味业是业界唯一业务覆盖全国的

绝对龙头。产能瓶颈和品牌价值为大型企业进一步拓展市场份额提供了天然优

势。

本报告中，我们对中国调味品行业的两大领军公司海天味业和中炬高新进行了直接比

较，涉及公司历史、产品线、经销网络以及品牌战略和管理水平。为了评估中国市场

潜力，我们将海天和中炬与全球同业进行了比较分析，并针对日本家喻户晓的调味品

品牌“万字”作出了案例研究。

我们对海天味业的首次评级为买入，12个月目标价格为人民币81元（上行空间

18%）。尽管海天已经是一家市值270亿美元的日用消费品公司（中国规模最大的日

用消费品公司，白酒企业除外）且对应34倍的预期市盈率，我们认为公司在市场整合

方面仍拥有充足空间，并将在未来3-5年实现稳定增长。我们对中炬高新的首次评级为

中性。

*全文翻译随后提供。

图表 1: 我们对海天味业/中炬高新的首次评级分别为买入/中性估值比较表（截至2018年9月17日）

Ticker Company name

Mkt cap (US$mn)

GS rating

Price Upside PE (2018E)

PE (2019E)

EPS CAGR

ROE (2018E)

603288.SS Haitian 27,001 Buy Rmb 81 68.5 18% 41.8 34.2 23% 35%600872.SS Jonjee 3,320 Neutral Rmb 31.1 28.7 8% 34.8 30.4 26% 17%

TP

资料来源：彭博、高盛全球投资研究

廖绪发, CFA (分析师)执业证书编号:S1420510120006+86(21)2401-8902 | [email protected]北京高华证券有限责任公司

中国日常消费品

地道中国味：首次覆盖调味品股：对海天味业评级为买入，对中炬高新评级为中性 (摘要)

2018年9月17日 | 7:36PM CST证券研究报告

北京高华证券有限责任公司及其关联机构与其研究报告所分析的企业存在业务关系，并且继续寻求发展这些关系。因此，投资者应当考虑到本公司可能存在可能影响本报告客观性的利益冲突，不应视本报告为作出投资决策的唯一因素。有关分析师的申明和其他重要信息，见信息披露附录，或请与您的投资代表联系。

mailto:[email protected]?subject=%E5%9C%B0%E9%81%93%E4%B8%AD%E5%9B%BD%E5%91%B3%EF%BC%9A%E9%A6%96%E6%AC%A1%E8%A6%86%E7%9B%96%E8%B0%83%E5%91%B3%E5%93%81%E8%82%A1%EF%BC%9A%E5%AF%B9%E6%B5%B7%E5%A4%A9%E5%91%B3%E4%B8%9A%E8%AF%84%E7%BA%A7%E4%B8%BA%E4%B9%B0%E5%85%A5%EF%BC%8C%E5%AF%B9%E4%B8%AD%E7%82%AC%E9%AB%98%E6%96%B0%E8%AF%84%E7%BA%A7%E4%B8%BA%E4%B8%AD%E6%80%A7%20%28%E6%91%98%E8%A6%81%29

https://research.gs.com/

Executive summary and key thesis in charts 3

INDUSTRY ANALYSIS 7

China condiments sector in growth stage 8

Case study: Japan condiments and Kikkoman 17

Haitian and Jonjee: Clear leader vs. premiumization beneficiary 21

Valuation methodology and M&A framework 33

COMPANY PROFILES 38

Haitian: Clear leadership to foster healthy industry growth; initiate at Buy 39

Jonjee: Riding the wave of premiumization; initiate at Neutral 46

APPENDICES 52

Appendix 1: Condiment industry snapshot 53

Appendix 2: China condiments in history 57

信息披露附录 59

2018年9月17日 2

全球投资研究中国日常消费品

目录

Executive summary and key thesis in charts

We believe China’s condiment sector has one of the most stable growth profiles and

clearest competitive landscapes to be found in the consumer category. China’s

condiment sector enjoys:

Stable demand: Unlike other FMCG or discretionary categories, condiments (soy1.

sauce, oyster sauce, chili sauce, etc.) are central to Chinese cooking and therefore

attract sticky and stable demand, no matter whether consumers are cooking at home

or eating out.

Low pricing elasticity on infrequent purchases and restaurant dependence: The2.

typical Chinese family purchases condiments once a month and spends Rmb10,

making consumers less price sensitive on condiments compared to other FMCG

products. Also, about 55% of condiments volume is used in the restaurant channel,

which tends to have stable brand preferences, resulting in relatively “sticky” prices

for condiments.

Over the next five years, we forecast the condiments market will post a CAGR of 9%,

driven by a combination of volume/ASP growth. Key drivers:

Foodservice strength: We expect foodservice (including online delivery) will continuen

to grow by the double digits yoy and outpace home cooking growth.

Diverse category: With the spread of local dishes (especially from Sichuan,n

Guangdong), consumer taste should diversify further, boosting growth potential for

smaller condiment categories like oyster sauce and bouillon.

Premiumization: China condiments ASP is 50% of Japan/Korea level, 45% of then

mass segment has an ASP of less than US$1/bottle. We see plenty of room for mid

and premium products to take up further market share.

Industry not yet competitive, Haitian leading in all aspects

We expect the overall condiments profit pool to double by 2023E and Haitian to take

39% profit share vs. 26% in 2017. Unlike China’s dairy or beer industries, where two to

three leaders have similar market share and compete on the regional level, the

condiments industry has only one clear leader with a national footprint and a

well-regarded brand, Haitian, followed by a few regional or niche players (such as

Jonjee). Also, the market structure remains fragmented (the top 5 players have 21%

market share) with unbranded or small brand products accounting for most of the

market. Hence, we expect the big players to expand distribution and take share from

non-brand players over the next three years.

Foshan Haitian: Haitian is the largest player with 13% market share and is twice as big

as the No. 2 player (Lee Kum Kee) in terms of revenue. It has established a national

brand with products in all condiment categories. Starting from the mass end, we expect

Haitian will further shift its portfolio toward the mid-end and premium segments, and

hence deliver 370bps of margin expansion by 2020E on the back of mix upgrades and

price hikes. We expect further penetration into lower-tier cities and county town areas

2018年9月17日 3


and expansion into diverse categories will fuel two-year CAGRs of 17% for sales and

21% for EPS. Given these positives and with our 12-month target price of Rmb81

(implying 18% upside), we initiate on Haitian at Buy.

Jonjee Hi-Tech: Jonjee is a premium soy sauce player from Guangdong province with its

Chubang and Meiweixian brands. We expect Jonjee will deliver above-market sales

growth and gradually improve margins. As Jonjee is still in the process of expanding

distributors and POS, and with its premium brand gaining popularity, we believe it can

deliver 14% condiment sales and a three-year EPS CAGR of 25%. However, with our

12-month target price of Rmb31.10 implying only 8% upside, we view the shares as

fairly valued and initiate coverage at Neutral.

Valuations look justified: Both stocks are trading at relatively high multiples vs. history

(34X/30X for Haitian/Jonjee in 2019E vs. 28X in history). However, we believe this

reflects the stable nature of the condiment industry and the companies’ less volatile

growth profile. Haitian’s superior return (32% CROCI) is among the highest in

consumer names. Hence, compared to Kikkoman’s P/E of 36X, EPS growth of 12%

yoy and 10% ROE, we believe Haitian’s multiple is not yet demanding.

图表 2: We expect the market to grow in the high single digits 图表 3: the China condiment profit pool to double by 2023...

67

114

195

0

50

100

150

200

250

2012 2017 2023E

RM

B b

n

Industry revenue

CAGR of 9.4%

0

5

10

15

20

25

0 50 100 150 200 250

China condiment profit pool Industry volume mn tons

Industry revenue pool (RMB bn)

2012 RMB 7bn

2017 RMB 15bn

2023E RMB 32bn

资料来源：Wind, NBS, Goldman Sachs Global Investment Research 资料来源：Wind, NBS, Goldman Sachs Global Investment Research

2018年9月17日 4


图表 4: ...with Haitian accounting for nearly 40% 图表 5: Haitian remains the only national player; other firmsare strong in certain regionsCompany revenue breakdown by region, 2017

20% 26% 39%

2% 4%

6%

59% 53% 38%

0%10%20%30%40%50%60%70%80%90%

100%

2012 2017 2023E

Condiment profit share breakdown

OtherShinhoJonjeeLaoganmaLee Kum KeeHaitian North

28%

South 22% South

44%

East 21%

East 25%

East 28%

Central 19%

Central 34%

Southwest 58%

0%10%20%30%40%50%60%70%80%90%

100%

Haitian Jonjee Jia Jia Qianhe

North South East Central West Overseas

资料来源：NBS, Company data, Goldman Sachs Global Investment Research Note: Overseas sales of Haitian is included in the southern China part

资料来源：Company data

图表 6: Exposure to high-growth channels: Channelbreakdown comparison, 2017

图表 7: We expect Haitian to post stronger sales growth andreturns in 2017-20EComparison of key metrics

70%

24%

0% 10% 20% 30% 40% 50% 60% 70% 80%

Haitian

Lee Kum Kee

Donggu

Jonjee

Qianhe

Jia Jia

Restaurant as % of total sales

17%

22%

35%

15%

25%

19%

0%

5%

10%

15%

20%

25%

30%

35%

40%

Sales 2017-20E CAGR Net income 2017-20ECAGR

2018E ROE

Haitian Jonjee

资料来源：Company data 资料来源：Company data, Goldman Sachs Global Investment Research

2018年9月17日 5


图表 8: Compared to US/Asian peers, China is still a less penetrated and less consolidated market Peer comparison of overall condiment consumption (as of 2017 unless specified)

China Japan Korea USA

Per capita consumption (kg) 12 26 22 21

Volume (K tonnes) 16,802.2 3,310.5 1,129.5 7,041.8

5.8% -0.7% 0.9% 0.6%

ASP (USD/kg) 2.6 7.5 6.7 6.4

3.2% 0.9% 1.2% 1.5%

CR5 (%)

Segment splitNote: segment with less than 3% of total volume does not show the data

Foodservice as % of total volume (%)

2012-17 CAGR

2012-17 CAGR

Vinegar 21% Bouillon

2% MSG 5% Pickled

Products 1%

Oyster Sauces

4%

Soy Sauces

60%

Chilli Sauces

2%

Others 3% Vinegar

3% Bouillon

3% Dry

Sauces 4%

Pasta Sauces

4% Pickled Products

21%

Mayonnaise 6%

Salad Dressing

s 5%

Soy Sauces

25%

Others 25%

Vinegar 11%

Bouillon 7%

Pasta Sauces

12% Pickled

Products 14%

Ketchup 9%

Mayonnaise 9%

Salad Dressing

s 7%

Soy Sauces

3%

Others 27%

Vinegar 12%

Bouillon 4%

MSG 3%

Pickled Products

27%

Ketchup 3%

Mayonnaise 3%

Soy Sauces

17%

Chilli Sauces

10%

Others 18%

12 26 22 21

21 32

80

25

55 38

81

28

Note: Euromonitor foodservice volume data is based on consumer perspective; food processing is not provided separately.

2018年9月17日 6


INDUSTRY ANALYSIS

2018年9月17日 7


China condiments sector in growth stage

Big and fast-growing market with rising ASPs and saucediversificationGiant to get bigger: China’s condiment market is already bigger than Japan and

Korea’s (retail and restaurants sales combined), and we believe China could surpass

the current US market size by 2023E. In China, per-capita soy sauce consumption is

already the highest vs. peers; however, overall condiment consumption still lags

significantly.

Also, condiments in China are priced at a large discount to peers, with soy sauce priced

40%/35% lower vs. Japan/Korea. In sum, we expect a smaller ASP gap vs. peers and

rising per-capita consumption. We forecast 4% ASP and 5% volume CAGR to drive the

market expansion in the next five years.

图表 9: China’s retail market for condiments is larger thanJapan’s; we expect it to reach US$45 bn by 2023E

图表 10: We expect higher per-capita consumption on furtherpenetration of light soy sauce and more dining out

6,710

24,116 28,201

40,112 44,691

05,000

10,00015,00020,00025,00030,00035,00040,00045,00050,000

Korea Japan China 2017 USA China 2023E

Total market size comparison (US$mn, 2017)

26.3

22.1 21.5

16.3

12.2

6.5 3.7

0.7

9.6 7.2

0.0

5.0

10.0

15.0

20.0

25.0

30.0

Japan Korea USA China2023E

China2017

Per capita consumption comparison (kg)

CondimentSoy sauce

资料来源：Euromonitor, Goldman Sachs Global Investment Research 资料来源：Euromonitor, Goldman Sachs Global Investment Research

2018年9月17日 8


Doubling profit pool and acceleration of consolidation by 2023EChina’s condiment industry saw double-digit growth in 2012-2017 and reached

ex-factory total sales of Rmb114 bn in 2017. Looking ahead, we forecast industry sales

to reach Rmb195 bn with an annual CAGR of 9%, and industry profit to double again by

2023E.

The industry is still relatively fragmented: In 2017, No.1 player Haitian took only 13%

revenue share and 26% profit share. However, we forecast consolidation to accelerate

over the next five years with the top five players accounting for 36% of revenues and

62% of profits by 2023E vs. 28% and 47% in 2017.

图表 11: Smaller ASP gaps vs. peers from ASP hikes andpremiumization

图表 12: We forecast a 9% CAGR for 2017-2023E, equallydriven by volume and ASPGrowth of ASP and volume

0.01.02.03.04.05.06.07.08.09.0

10.0

Japan Korea USA China2023E

China2017E

Global retail ASP comparison (USD/kg)

CondimentSoy sauce

Category 2012-17E 2017-23ECondiments 6% 5%Bouillon 8% 6%Vinegar 7% 6%MSG -4% -3%Pickled Products 4% 3%Oyster Sauces 9% 7%Soy Sauces 6% 5%Chilli Sauces 5% 4%

Category 2012-17E 2017-23ECondiments 3% 4%Bouillon 3% 3%Vinegar 4% 4%MSG -1% 1%Pickled Products 3% 4%Oyster Sauces 4% 4%Soy Sauces 4% 4%Chilli Sauces 4% 3%

Volume CAGR

ASP CAGR


图表 13: We expect the condiment market to grow by thehigh single digits

图表 14: By 2023, we expect the profit pool to double...

67

114

195

0

50

100

150

200

250

2012 2017 2023E

RM

B b

n

Industry revenue

CAGR of 9.4%

0

5

10

15

20

25

0 50 100 150 200 250

China condiment profit pool Industry volume mn tons

Industry revenue pool (RMB bn)

2012 RMB 7bn

2017 RMB 15bn

2023E RMB 32bn

资料来源：Wind, NBS, Goldman Sachs Global Investment Research 资料来源：Wind, NBS, Goldman Sachs Global Investment Research

2018年9月17日 9


Driver #1: The rise of “eating out”Reshaping consumer dining habits: Alternatives to home cooking are being increasingly

welcomed by consumers. In a consumer survey conducted by iResearch in June 2018,

more than 50% of respondents said they dined in restaurants more often than they had

previously. About 300mn Chinese consumers placed food delivery orders online in 2017;

online delivery – no longer a niche segment in China – generated US$30bn of sales in

2017, up 21% yoy, according to iResearch.

More changes to come with rising number of younger workers and growing spending

power: According to iResearch, c.65% of middle-class Chinese born in the 1980s/90s

dine out at least three times per week. We believe this indicates a stronger preference

for convenience among young consumers. As more and more people born after 1995

join the labor force and spending power grows, we see further upside for foodservice

consumption.

Restaurant channel key for condiment consumption: As shown in Exhibit 17, more than

50% of soy sauce, oyster sauce, bouillon and MSG is consumed in restaurants, despite

the fact that most food is still consumed in the home. Why? As an example, a 500ml

bottle of soy sauce lasts for a table turnover of 4-5 times in hot pot/barbecue

restaurants, while it may take more than a month for a family to empty the same bottle.

图表 15: ...and consolidation in both the revenue pool... 图表 16: ...and the profit pool to accelerate by 2023E

11% 13% 19%

2% 3% 4%

74% 72% 64%

0%10%20%30%40%50%60%70%80%90%

100%

2012 2017 2023E

Condiment revenue share breakdown

OtherShinhoJonjeeLaoganmaLee Kum KeeHaitian

20% 26% 39%

2% 4%

6%

59% 53% 38%

0%10%20%30%40%50%60%70%80%90%

100%

2012 2017 2023E

Condiment profit share breakdown

OtherShinhoJonjeeLaoganmaLee Kum KeeHaitian

资料来源：NBS, Company data, Goldman Sachs Global Investment Research 资料来源：NBS, Company data, Goldman Sachs Global Investment Research

2018年9月17日 10


Driver #2: ASP upside from product upgrade and direct price hikesChina’s condiment industry is going through a robust premiumization trend. Using soy

sauce as an example, the industry began with blended to brewed soy sauce, then

moved from solid-state to liquid-state fermentation, which requires a longer

manufacturing time to bring out flavor (the amount of amino acid content determines the

degree of umami). The latest upgrades include specialized, first extracted, zero addictive

and organic products that are tailored to different dishes and satisfy consumers’ desire

for a healthier and more natural lifestyle.

Apart from premiumization, the condiment industry generally hikes prices every three

years to pass on the impact from inflation. ASPs for condiments in China are generally

lower than for peers (Korea, Japan and Taiwan) across categories from soy sauce and

oyster sauce to pickled products and bouillon.

We see two key characteristics of condiment consumption and procurement:

图表 17: Most condiments are primarily consumed inrestaurantsRestaurant volume percentage (2017)

图表 18: c.65% of middle-class Chinese born in the1980s/90s dine out at least three times per weekConsumer survey

55% 56%

72%

4%

61% 56%

12%

0%

20%

40%

60%

80%

Restaurant volume as % of total

<1 monthly Never3/4 times weekly

2018 frequency of foodservice purchasefor Chinese consumers

Overall Middle class born in 80s/90s> twice daily Once daily 5/6 times weekly

Once/twice weekly Twice/3 times monthly

100%

80%

60%

40%

20%

0%

64.6% >3/4 times per week

资料来源：Euromonitor Note: The study defines the middle class as individuals with more thanRmb100,000 in annual income. The survey was conducted in June 2018, witha sample size of 1,490.

资料来源：iResearch

图表 19: We expect foodservice condiment volume growth tocontinue to outpace the retail channel in most categoriesCategory growth by channel

图表 20: Frost & Sullivan expects restaurant sales to grow ata CAGR of 9.6% in 2017-2022Restaurant sales yoy

Category 2015-17 2017-23EBouillon 5.7% 4.8%

7.3% 6.6%Pickled Products 4.0% 2.7%

3.1% 2.1%Oyster Sauces 7.7% 6.4%

8.7% 7.4%Soy Sauces 4.8% 3.0%

5.8% 4.7%Chilli Sauces 4.8% 3.8%

4.7% 3.8%Retail volume Foodservice volume

3,964

6,280

0%

2%

4%

6%

8%

10%

12%

14%

16%

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Restaurant sales (Rmb bn) YOY

资料来源：Euromonitor, Goldman Sachs Global Investment Research 资料来源：Frost & Sullivan Analysis

2018年9月17日 11


Characteristics of family consumption - low frequency, low ASP per item and taste1.

stickiness: Purchases for family consumption are typically infrequent (generally once

every 1-2 months), and spending on condiments is relatively minimal. On a

transaction basis, the average retail price of a 500ml bottle of soy sauce/oyster

sauce is less than Rmb8/Rmb11; from a consumer expenditure perspective,

condiments account for only c.1% of spending on food and beverage products for

Chinese.

Stable quality critical for restaurant procurement: As the consistency of cooking2.

quality plays an important role in attracting regular customers, chefs and restaurant

owners place a high value on stable flavor and quality, which makes them more

likely to stick with the same brands.

As a result, condiment consumption has been relatively inelastic; the degree of price

hikes have typically more than offset the rising cost pressure from raw materials and

packaging materials. We expect an ASP CAGR of 3%-4% across most categories

(except MSG) in 2017-2023E, benefiting from stable ASP hikes and continuous product

upgrades over time.

图表 21: Most categories have seen stable ASP growth in2012-2017E (except MSG)ASP growth

图表 22: China ASP: Mid-single-digit growth withpremiumizationASP trend for condiments in China

Category 2012-17 2017-23ECondiments 3% 4%Bouillon 3% 3%Vinegar 4% 4%MSG -1% 1%Pickled Products 3% 4%Oyster Sauces 4% 4%Soy Sauces 4% 4%Chilli Sauces 4% 3%

ASP CAGR

-1%0%1%2%3%4%5%6%7%

0.0

0.5

1.0

1.5

2.0

2.5

3.0

ASP Yoy growthUUSUS$US$/US$/kUS$/kgUS$/kg


图表 23: China’s lower ASP relative to major peers… 图表 24: Companies generally hike prices every three yearsto match inflationASP hike history

0.02.04.06.08.0

10.012.014.016.0

Soy Sauces Oyster Sauces Pickled Products Bouillon

ASP comparison (USD/kg) China Korea Japan Taiwan

ASP hikes EventsHaitian 5% Jan 2017 2014Jonjee 6% Mar 2017 2014Hengshun Apr, Jun 2016Fuling Zhacai 15% Feb 2017Note: almost hike price every 3 years to match inflation

资料来源：Euromonitor 资料来源：Company data

2018年9月17日 12


Driver #3: Sauce diversification along with national expansion oflocal dishesUniquely China - soy sauce dominance: While the local cuisines of Japan and China rely

on soy sauce to add saltiness and enhance umami, there is a divergence in the overall

consumption of condiments: soy sauce represents only 25% of the condiments

consumed in Japan, which we attribute to the influence of western culture (see next

section for Japan case study), but it represents 60% of the condiments consumed in

China.

We attribute the popularity of soy sauce in China to a number of factors: 1) soy sauce

continues to be a substitute for salt in China; 2) the use of soy sauce is prevalent across

all types of Chinese cuisine from the south to the north of the country; 3) cuisines with a

high consumption of soy sauce (such as hot pot and Guangdong cuisine) have become

increasingly popular, as shown in the popularity heatmap of the two cuisines shown in

Exhibit 27.

We expect soy sauce to remain predominant among Chinese flavors, but we also expect

other flavors to gain share gradually due to the expansion of local dishes. Mainly, we

attribute this to the growth of migration and domestic travel/e-commerce as well as

policy support.

Migrant movement: Sichuan province has been one of the biggest sources of migrants

(c.12mn, 15% of total cross-province migrants in 2017). The top five destinations for

migrants are Guangdong, Zhejiang, Chongqing, Shanghai and Beijing. Correspondingly,

we see a rise of popularity for Sichuan food in these regions, first in the south, then the

Yangtze River Delta, and finally across the rest of the country.

Exposure to diverse cuisines through travel and e-commerce: Domestic travel continues

to see growth in the low teens, and the number of trips reached 5bn in 2017. In addition,

e-commerce allows consumers to taste non-local dishes without the need to travel far

away.

Favorable policy supports national expansion of local dishes: In 2015, the Yunnan

government launched a promotional campaign to publicize Yunnan cuisines nationally

and support the foodservice, agriculture and tourist businesses. In 2016, the Chengdu

government issued policies aimed at: 1) boosting the value of restaurant sales to

Rmb100 bn by 2020E; and 2) enhancing Chengdu’s role as the standard-setter and

center for the production and distribution for Sichuan food ingredients (e.g., spices, spicy

sauce, etc.).

As such, we expect stronger growth for smaller condiment categories that cater to

regional cuisines including vinegar, bouillon and oyster sauce in 2017-23E relative to

soy sauce.

2018年9月17日 13


图表 25: Soy sauce accounts for 60% of condiment volumeconsumed in China...China condiment breakdown (2017)

图表 26: ...but only accounts for 25% in JapanJapan condiment breakdown (2017)

Bouillon 3%

MSG 5%

Pickled Products

1%

Oyster Sauces 4%

Soy Sauces 60%

Chilli Sauces 2%

Others 3%

Vinegar 21%

China condiment breakdown

Bouillon 3%

Dry Sauces 4%

Pasta Sauces 4%

Pickled Products

21%

Ketchup 3%

Mayonnaise 6%

Salad Dressings

5%

Soy Sauces 25%

Others 25%

Vinegar 3%

Japan condiment breakdown

资料来源：Euromonitor, China Condiment Association Note: Soy sauce in Japan includes soy derivatives (e.g., Teriyaki, Sukiyaki,Yakitori).

资料来源：Euromonitor, Statistics Japan

图表 27: Popularity trend for hot pot, Guangdong food

Soy sauce is heavily used in hot pot and Guangdong food.

Strong Weak Popularity

Popularity of hot pot in China over time

2013 2014 2015 2016

Popularity Strong Weak

Popularity of Guangdong food in China over time 2013 2014 2015 2016

资料来源：Dianping.com

图表 28: Population migration, and the spread of local tastesnationwide, helps diversify condiment consumptionImmigrant workers (2016)

图表 29: We expect oyster sauce, vinegar and bouillon togrow faster than soy sauce in 2017-2023ECategory growth (2017-2023E CAGR)

0%

5%

10%

15%

20%

25%

30%

35%

40%

Guangdong Zhejiang Chongqing Shanghai Beijing

Destination breakdown of Sichuan immigrant workers

7%

6% 6% 5%

4%

3%

0%

1%

2%

3%

4%

5%

6%

7%

8%

OysterSauces

Vinegar Bouillon Soy Sauces ChilliSauces

PickledProducts

Total volume

资料来源：Government of Sichuan Province 资料来源：Euromonitor, Goldman Sachs Global Investment Research

2018年9月17日 14


Driver #4: Leaders gain share from consumption upgrade, nationalexpansion and brand leverageWe see a number of factors as benefiting condiment leaders, particularly in the soy

sauce segment, driving further consolidation. Haitian, Jonjee and Lee Kum Kee – the

top three players in China – account for only 25% of the soy sauce segment,

significantly below the c.60% market share for the top three players in the US and

Japan.

Compared to the other condiment segments, soy sauce has characteristics that may

limit the entry of new players into the segment. Even though the soy sauce market

dominates condiment consumption in China, southern China is the most suitable region

for the production of liquid-state soy sauce (c.25% of all types of soy sauce; has superior

taste and stronger umami). As a result, Guangdong province produces the largest share

of the soy sauce consumed in China (at least 35% of national production).

Furthermore, as leading players move beyond the soy sauce segment, we expect they

will accelerate expansion in not only soy sauce but also other condiment categories over

the next five years. As they seek to do this, they will be able to employ their advantages

in product differentiation, national expansion capability and brand leverage to extend

their category portfolio.

图表 30: Low concentration but consolidating in ChinaMarket share for China’s top-five condiment players

图表 31: Haitian accounted for 16% of market share byvolume in 2017

17% 18%

19% 19%

20%

21% 21% 21% 21% 21%

15%

16%

17%

18%

19%

20%

21%

22%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

China top 5 market share

16%

4%

3%

10%12%14%16%18%20%22%24%

2014 2015 2016 2017

Soy sauce market share by volume Haitian Meiweixian Lee Kum Kee

资料来源：Euromonitor 资料来源：Company data, Euromonitor, NBS

2018年9月17日 15


图表 32: Soy sauce market in China is more fragmented thanin other countries (2017)Soy sauce top-three market share in China

图表 33: Guangdong province contributes more than 35% ofnational volume

25%

61% 67% 68%

88% 95%

0%

20%

40%

60%

80%

100%

China USA Japan Taiwan UK Korea

Soy sauce top 3 market share

0

2

4

6

8

10

12

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

Mill

ions

tons

Soy sauce production volume breakdown Guangdong Other

资料来源：Company data, NBS, Euromonitor 资料来源：NBS

2018年9月17日 16


Case study: Japan condiments and Kikkoman

Industry dynamicsThree stages for Japan soy sauce in 1972-present: Japan has gone through three

development stages over time — consumption upgrade, maturing stage, and declining

stage.

Consumption upgrade (1972-1982): The average Japanese consumed more than 10

litres per year (12 litres at the peak level in 1973), and ASP more than doubled in 10

years. During this stage, ASP growth was highly correlated to income growth, which

more than doubled from ¥0.9mn in 1972 to ¥2.4mn in 1982.

Maturing stage (1982-2000): ASP was relatively stable (except for a 10% rise in 1991).

Consumers gradually switched from soy sauce to other sauces, which led to a decline in

per-capita consumption to c.8.5 litres by around 2000.

Declining stage (2000-present): ASP has suffered from deflationary pressure.

Furthermore, the decline of per-capita consumption in soy sauce accelerated; due to this

factor, combined with the shrinking population since 2008, industry volume dropped to

below 800K kl. In response to the industry downsizing, smaller players exited the market

(6K in 1955 vs. only 1.3K in 2015), and leaders grew through consolidation.

图表 34: Initially the industry continued to grow by upgrading productsASP and volume trend of soy sauce in Japan

050

100150200250300

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

CPI: soy sauce in JapanMaturing stage Declining stage Consumption

upgrade

4

6

8

10

12

0200400600800

100012001400

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

’000

kl

Production volume Consumption per cap (litre)

资料来源：Department of Agriculture, Forestry and Fisheries

2018年9月17日 17


Kikkoman case studyKikkoman has implemented three key strategies to support sustainable growth:

premiumization, globalization and diversification.

PremiumizationAlong with the strong income growth since 1960, consumers have increasingly moved

beyond the satisfaction of basic needs in search of rich flavors, health benefits, and

quality ingredients, and they have become more and more willing to pay a premium for

higher-quality products. Kikkoman, which began producing natural brewed soy sauce in

the 17th century, earned its premium reputation in the early 19th century. Post World

War II (during the late 1940s), chemically produced soy sauce became dominant, and

consumers increasingly opted for western food that did not use soy sauce. At this time,

Kikkoman promoted its key differentiation (natural brewing techniques), implemented

effective marketing activities (e.g., sponsorship of cooking programs on TV that paired

soy sauce with a variety of food, new and unique packaging, and free cooking classes

for Japanese housewives) and became a key beneficiary in the first round of product

upgrade - from chemically produced to naturally brewed soy sauce.

Facing the continued declining industrial trend, Kikkoman has introduced a number of

key SKUs since the 1960s to satisfy growing demand for premium products - lite soy

sauce (50% less salt), premium soy sauce, organic soy sauce and raw soy sauce

(unpasteurized). Lite soy sauce, for example, represented 13% of Kikkoman’s total soy

sauce production by 2014.

图表 35: In the later stages of industry development, amiddeflationary pressure and declining volume, major playersgrow through consolidationMarket share breakdown over time

图表 36: The number of soy sauce makers declined from9,000 in 1917 to 2,300 in 1989 and to 1,258 in 2015 Number of soy sauce manufacturers

Kikkoman Yamasa Higashimaru Shoda MarukinOthersMajor other brands

(%)

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

1955

1960

1965

1968

1971

1974

1977

1980

1983

1986

1989

1992

1995

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Number of soy sauce manufacturers

资料来源：Company data 资料来源：Department of Agriculture, Forestry and Fisheries

2018年9月17日 18


GlobalizationWe identify a number of factors that have contributed to Kikkoman’s successful

globalization of soy sauce.

Firstly, instead of expanding to other Asian countries, Kikkoman decided to prioritize the

US market where no established brands or preferred local tastes of soy sauce existed.

At that time (in the 1950s), the soy sauce market in the US was dominated by two major

players selling chemically produced soy sauce. Thus, Kikkoman was able to differentiate

itself by developing a higher standard of soy sauce. In addition, higher income levels

made consumers more willing to try new things.

Secondly, rather than limiting itself to Asian dishes, which at that time were not

considered to be mainstream cuisine in the US, Kikkoman popularized the use of soy

sauce with local food (such as steak). In addition, it developed tailored soy sauce/soy

sauce derivatives for western dishes to strengthen competitiveness vs. local sauces

(e.g., Teriyaki for barbecue, sweet and sour sauce, steak sauce, etc.).

Lastly, Kikkoman maintained its premium positioning and did not join the price war

initiated by two other players (La Choy and Chun King). Instead, it emphasized the

quality of its products through the 15% ASP premium relative to peers and obtained the

profitability needed to fund consumer education and brand building. Kikkoman employed

a diverse range of promotional campaigns, including: offering free recipes to

housewives, staging in-store demonstrations where consumers could sample foods

flavored with Kikkoman sauces, introducing products to chefs and food critics, and

running advertisements that promoted the use of soy sauce with steaks.

DiversificationBeyond soy sauce, Kikkoman also diversified into segments by leveraging its strength in

marketing, technology and know-how.

图表 37: Product upgrade: From a focus on health to betterraw materials to new tastesKikkoman product upgrade

图表 38: Soy sauce with less salt contributed 13% of sales in2014, vs. only 7% in 2004.

TypeLite soy sauce

Premium soy sauce

Organic soy sauce

Raw soy sauce

Chacteristics 50% less salt

Premium soybean Organic Unpasteuriz

ed

Year of launch 1965 1990 1998 2010

Mix upgrade from product innovations

7%

13%

0%

2%

4%

6%

8%

10%

12%

14%

2004 2014

Lite soy sauce sales volume as % of total

资料来源：Company data 资料来源：Company data

2018年9月17日 19


Marketing expertise: In 1962, Kikkoman secured the Coca-Cola franchise in Japan and

formed a joint venture with Del Monte to obtain the perpetual marketing rights to sell Dell

Monte’s tomato ketchup and juices in Asia.

Technology development: In the 1990s, Kikkoman developed biotechnology (genetically

modified organisms) that made it possible to detect contaminating microorganisms in its

food processing line.

Fermentation know-how: Kikkoman launched Manns Wine in 1962 to produce and sell

western-style wine. At a time when domestic consumption of wine was low, the company

promoted wine as a healthy beverage with corresponding marketing campaigns such as

tasting booths; this helped boost home consumption from 0% to 20% of total wine

consumption in Japan.

图表 39: In the US market, Kikkoman has developed new soy sauce derivative products over timeto tailor to local tastes and the latest health trendsDiversification to soy sauce derivatives

Retail condiment product listSoy sauce

Lite Soy Sauce

TeriyakiLite TeriyakiRoasted Garlic TeriyakiTeriyaki Baste & Glaze Steak Sauce

Sukiyaki SauceTempura Sauce

Quick & Easy: Seasoning Mix:

Teriyaki Baste & Glaze with Honey & Pineapple

Chow Mein, Fried Rice, Stir-Fry Mix, Sweet & Sour, Teriyaki Mix, Meat Marinade, Broccoli Beef

Stir-FrySweet & SourSweet & Sour Dipping SauceMemmiKotterin MirinTonkatsu Sauce

Toasted Sesame, Roasted Garlic & Herb, Honey & Mustard

1983: Responded to people’s desire of healthy diet

After 1970: introduced soy sauce derivative products

1961: Introduced Teriyaki, accustomed to American market to grab share from barbecue sauce


图表 40: Diversification relying on existing strengths in marketing, technology and know-howDiversification

OthersSoy sauce Food products

Beverages Liquor and Wine

Foods-wholesaleSoy sauce Del Monte

- Asia & OceaniaOther Foods- North America

Biochemical business, chemical, logistics and other business

Sales of oriental food products in Japan and overseas

Foods-Manufacturing and sales (overseas)

Foods-Manufacturing and sales

- North America- Europe- Asia & Oceania


2018年9月17日 20


Haitian and Jonjee: Clear leader vs. premiumization beneficiary

China’s condiment industry is characterized by having one clear leader, a focus on the

soy sauce segment, and increasing brand segmentation.

One industry leader: Haitian sales are significantly larger than those of peers. Based on

ex-factory sales, Haitian is almost four times as big as Jonjee and almost eight times as

big as Jia Jia. In comparison, we normally see more than two comparably big players in

a sector in China, such as Yili and Mengniu in the dairy sector, and ABI China, CR Beer

and Tsingtao in the beer sector.

Clear priority of soy sauce segment: Both Haitian and Jonjee generate most of their

sales from soy sauce, at 61% and 65%, respectively, in 2017. At an industrial level, 60%

of condiment sales are derived from soy sauce products. We expect the dominance of

soy sauce to persist in China as: 1) soy sauce continues to be a substitute for salt; 2) the

use of soy sauce in China is prevalent in all types of cuisine from the south to the north

of the country; 3) cuisines with a high consumption of soy sauce (such as hot pot and

Guangdong cuisine) are becoming increasingly popular in China.

Differentiating segmentation: Comparing by pricing strategy, Haitian and Jia Jia have big

exposure to the mass to mid end while Jonjee, Qianhe and Shinho remain in the

premium/super-premium segment. This difference in target consumers, signaled by the

different pricing strategies, has allowed many of these companies to enjoy double-digit

growth over the past few years.

图表 41: Haitian is China’s clear leader in condiment salesSize of major players (2017)

图表 42: Soy sauce represents most of Haitian’s sales, andcondiments account for 90% (2017)

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

Haitian Jonjee Jia Jia Hengshun Fuling Zhacai

Sales size (RMB mn)

Soy sauce 61% Oyster sauce

16%

Other Sauce 14%

Others 10%

Haitian sales breakdown


2018年9月17日 21


Historical background: Why is Haitian the clear leader?A few key factors have supported Haitian’s growth:

Developed into a profit-oriented company: In 1994, Haitian became the first condiment

company in China to transit from being a state-owned company to a corporation with

shares primarily owned by employees. Later, it used a stock ownership program to help

retain talent - key employees were given shares options/stock placements but had to sell

them back at book value if they left the company. In 2007, Haitian changed from being a

collectively owned LLC to a private enterprise, laying the foundation for strong incentives

that align interests and unlock growth potential.

Started with brand building and then diversified to leverage brand power: Haitian’s

strategy is to build big SKUs and become No.1 in a segment before spending huge

resources to cultivate other products. This concentration of resources has helped Haitian

maintain its position as China’s biggest soy sauce maker since 1994; it has also

helped to cement Haitian’s association with quality soy sauce in the minds of

consumers. Leveraging its strong brand image and reputation, Haitian has diversified

into new sub-categories, e.g. soybean sauce and sauce for rice. By 2013, these two

SKUs already reached sales of Rmb1 bn and Rmb100 mn, respectively.

From a regional to a national distribution network: Twenty years ago, a number of

leading companies were well-known for the quality of their soy sauce; however,

industrial dynamics began to change after Haitian began recruiting college graduates to

fill national sales roles in 1997, and Haitian quickly rose to the No.1 position in Hubei

province the following year. With strong execution, Haitian is now a national player with

29% of sales from the central/west and 28% from north China. Haitian continued to

expand globally and now sells to more than 60 countries.

Becoming the lowest-cost player in the industry: Haitian expanded capacity by 1mn tons,

1.5mn tons and 2.2mn tons in 2005, 2010 and 2017, respectively. This leadership has

ensured that Haitian enjoys the lowest costs due to economies of scale.

图表 43: Over 90% of Jonjee’s revenue comes fromcondiments (2017)

图表 44: Jonjee has a higher ASP than both Haitian and JiaJiaASP comparison (Rmb/ton)

Soy sauce 65%

Chicken essence

11%

Other sauces 11%

Others 4%

Jonjee sales breakdown

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

2012 2013 2014 2015 2016 2017

Haitian Jia Jia JonjeeRMB K/ton


2018年9月17日 22


图表 45: We identify four key factors that have supported Haitian’s growth: 1) management incentives are properly aligned with company; 2) leverage of established brandreputation; 3) depth of distribution; and 4) economies of scaleHaitian in history

1994 1997 1998 2002 2005 2006 2007 2011 2013 2014 2017

2006: "China Time-honored Brand",

Expanded to oyster, vinegar, etc.

2007: Introduction of

Soybean Sauce

2011: Introduction of Sauce for Rice

2014: IPO to support capacity expansion plan

2017: launch 2.2mn ton capacity

expansion plan

2005: 1mn ton plant - biggest worldwide 2010: launch 1.5mn ton capacity expansion plan

Turning to a market-oriented profit-maximizing organization

Going international and Continuing nationalization: from south to north, then coastal to central

2007: LLC to private enterprise, share repurchase at Rmb 19.532/stock

Regional to national

Economies of scale: lowest cost player

2005: Soy sauce export +50% yoy

Corporate 2002-2006: Stock option and employee stock placement at Rmb 2.18/stock; If leaving the

company, compulsory to sell at Rmb 1.0

1994: SOE to LLC, 70% owned by employees (749

employees), purchase price Rmb 1/stock

Incentive alignment Retaining talents

Diversification to leverage brand reputation

Product

Distribution

Scale

1997: Recruit college graduates for S&D nationally

1998: No.1 in Hubei

1994: Biggest soy sauce producer in China

Building brand recognition

2013: Introduction of premium soy sauce line "Time Honor", Soybean sauce and sauce for rice to reach

Rmb1bn and Rmb100mn sales respectively

North 26%

South 28%

East 25%

Center 15%

West 6%

2009 Sales by geography

North 28%

South 22%

East 21%

Center 19%

West 10%

2017 Sales by geography

资料来源：Company data, Goldman Sachs Global Investment Research

2018年9月17⽇ 23

全球投资研究中国⽇常消费品

Haitian maintains leadership while Jonjee rises with premiumizationIn this section, we take a deep dive into Haitian and Jonjee across a number of

dimensions - products, cost differentials, branding, distribution and employee incentives.

The analysis addresses two key questions: 1) Why have Haitian/Jonjee seen their share

prices more than triple/double over the past five years? 2) How much further upside

potential could we see over the next five years?

图表 46: Share price vs. sales vs. OPM trend for Haitian and Jonjee

335

100

256

0

50

100

150

200

250

300

350 Share price performance

HaitianJonjee

Haitian: initial public offerings

Haitian: launched 2.2mn tons condiment expansion project

Haitian: slower sales yoy at 7% only for 1Q16

Haitian: launched 1.5mn tons condiment expansion project

Haitian: launched Signature Sauce for Rice, reaching RMB 100mn sales in 2013

Haitian: introduced premium soy sauce "Time Honor", Soybean sauce to reach Rmb1bn sales

Jonjee: Qianhai Life became biggest shareholder Jonjee: capacity expansion in Yangxi

Jonjee: branding ad "basking for 180 days"

Jonjee: 650K tons Yangxi capacity expansion project

5,516 6,091 7,070

8,402 9,817

11,294 12,459

14,584

17,072

1,278 1,735 1,754 2,318 2,642 2,759 3,158 3,609 4,322

02,0004,0006,0008,000

10,00012,00014,00016,00018,000

2010 2011 2012 2013 2014 2015 2016 2017 2018E

Sales (RMB mn)

HaitianJonjee

4.3X

4.0X

17% 19% 21% 22% 24% 25% 26% 27% 28%

9% 9% 8% 12% 13% 12%

15% 16% 18%

0%

5%

10%

15%

20%

25%

30%

2010 2011 2012 2013 2014 2015 2016 2017 2018E

Operating profit margin

HaitianJonjee

0%

5%

10%

15%

20%

25%

30%

35%

2010 2011 2012 2013 2014 2015 2016 2017 2018E

ROIC

HaitianJonjee

资料来源：Datastream, Company data, Goldman Sachs Global Investment Research

2018年9月17日 24


#1 Product differentiation: Haitian dominates mass and mid-end while Jonjeespecializes in the high-end segment Haitian - affordable and comprehensive offerings: Haitian has three soy sauce SKUs

with Rmb1 bn in sales - Gold label soy sauce (金标), mushroom-flavored dark soy sauce

(草菇老抽) and premium soy sauce (味极鲜), priced at Rmb10/500ml, Rmb9/500ml and

Rmb9.9/380ml, respectively. This is consistent with Haitian’s strategy of offering

affordable products to mass-market consumers. Haitian has also developed soy sauce

derivatives that have been well received by consumers (e.g., sauce for rice and soybean

sauce), and it has diversified into other sub-categories as well, with meaningful sales

contribution from oyster sauce. In total, Haitian offers more than 200 SKUs (160 SKUs in

Tmall) to its consumers nationally.

Jonjee - stay premium: In comparison, 90% of Jonjee’s sales come from products with

amino acid content higher than the industrial standard of premium quality (0.8%), and

the biggest sales contribution for Jonjee is its signature soy sauce, which is priced at

Rmb 9.5/410ml. This clearly shows Jonjee’s differentiation and more premium

positioning relative to industrial leader Haitian.

图表 47: ASP differences are due to various niche market needs and premium product offeringsSoy sauce brand mapping

Soy sauce500ml/bottleVolume market share

Sales breakdown: 20%Premium (>Rmb 10)

Organic soy sauce Organic soy sauce Organic soy sauce41.6 37.0 68.0Natural brewed sauce Natural brewed sauce Natural brewed sauce Natural brewed sauce Natural brewed sauce23.8 18 11.2 21.4 29.8First extracted soy sauce Signature soy sauce First extracted sauce26.9 10.4 15.8Chili soy sauce Natural children’s sauce Sweet soy sauce Sashimi soy sauce16.7 35.0 23.9 39.0Premium soy sauce Premium soy sauce Premium soy sauce Seasoned soy sauce11.2 11.5 12.9 19.9

Sales breakdown:35%Gold label soy sauce Gold label soy sauce Premium light soy sauce Salt reduced light sauce10.0 9.1 10.0 9.8Yi Pin Xian Gold label soy sauce Gold label soy sauce Seasoned soy sauce9.9 9.1 9.8 8.8Mushroom flavored dark Mushroom flavored dark9.0 9.1

Sales breakdown: 45%Seasoned soy sauce Meiweixian gold label Light soy sauce Gold Label sauce6.9 6.8 6.0 7.9Superior soy sauce Meiweixian dark Mushroom flavored dark Mushroom flavored dark5.5 6.2 5.8 7.8Superior dark Meiweixian traditional Kum chun soy sauce5.5 3.5 6.0

30% 80%

10%55%

10%15%

Haday (Haitian) Chubang (Jonjee) Lee Kum Kee

1) Organic

2) Zero addictive

16% 4% 3%2%

KikkomanMaster (Kraft Heinz)

0.1%

3) First extraction

4) Specialized

Note: 1) Typically, there are two ways of fermentation for soy sauce. Liquid-state: natural brewed soy sauce requires 3-6 months of fermentation process for soybean / wheat. Solid-state: it requires only 15-45 days of fermentation for wheat skin and soybean. At higher costs, the liquid-state method produces higher content of amino acids, which translates into better tastes.2) After the fermentation process, saline water is used to extract the amino acids. The first extraction contains more amino acids and as a result is more premium than the second and third extractions.3) Zero addictive means no sweetening agent, essence, pigment or preservative.4) dark sauce is adding caramel coloring into light soy sauce.

5) Umami

Mid-end (Rmb 8-10)

Mass (<Rmb 8)

资料来源：Tmall.com, Goldman Sachs Global Investment Research

2018年9月17日 25


#2 Distribution: Haitian’s strength is in the relatively “sticky” restaurantchannel and national distribution; Jonjee is an established regional playerskewed to family consumptionHaitian has an extensive national distribution network. Haitian’s sales are more evenly

distributed than for other major players, with the eastern/northern /southern regions each

contributing 20+% of revenue. Western sales ratio as a percentage of the total has also

grown steadily. This is supported by the company’s extensive distribution network, with

3,500 first-tier distributors, about 1mn POS, and penetration to the county level in China.

In addition, Haitian plans to grow the size of its distributors in line with sales growth

every year in order to drive further penetration. Haitian also has significant exposure to

the restaurant channel (c.70%). The sticky demand from restaurants, which tend to favor

products that have high and stable quality, should help Haitian enjoy stronger channel

growth vs. retail along with the rise of dining out and delivery service.

We believe Jonjee, which is established in private consumption in the south and east,

has the potential to become the second national condiment player. Southern and

eastern China accounted for 44% and 25% of the company’s sales, respectively, in

2017. Outside of the southern part of the country, Jonjee still operates mostly at the

prefecture level, selling to 250K POS through 700+ first-tier distributors. It aims to

increase its first-tier distributors 10% every year to reach 1,000 by 2020E. The company

maintains good and stable relationships with distributors, and offers 5%-10% net margin

for its distributors; this is higher than for Haitian but similar to the industry average.

Besides, the majority of Jonjee’s sales come from family purchases through the retail

图表 48: Haitian’s diversification within soy sauce/soy sauce derivativesDerivatives of soy sauce

Examples XO sauce Seafood sauce Soybean sauce Abalone sauce Signature sauce for rice

Soy sauce derivatives

Ingredients Soybean oil, scallop, shrimp, etc.

Sugar, soybean, wheat, salt, garlic, vinegar, etc.

Soybean, sugar, salt, garlic, vinegar, etc.

Soy sauce, sugar, salt, abalone, wine, etc.

Soybean oil, mushroom, chili, salt, etc.

Balanced flavor


图表 49: Haitian has the most comprehensive offerings of productsCategory diversification

(RMB mn) Tmall SKUs Soy sauce Soybean sauce Oyster sauce Chicken powder Cooking wine Vinegar Chili sauceSales 8,836 1,000 2,040 NA NA NA NA

160

Sales 2,348 100 100 414 50 80 NA

118

Haitian

Jonjee

资料来源：Company data, Goldman Sachs Global Investment Research, Tmall.com

2018年9月17日 26


channel, and only 24% of its sales are generated through the restaurant channel. Jonjee

is working on expanding its restaurant channel through chef clubs and sponsorship of

chef competitions.

Strong bargaining power against distributors: Both Haitian and Jonjee have adopted

cash before delivery as a core element of their distributor policies. This has resulted in

significantly lower accounts receivable days compared to other industries in the

consumer space. It may also suggest there is limited competition in the industry

currently and significant upside for condiment penetration.

#3 Branding: Haitian’s 10X spending to educate consumersThree-hundred-year history of sauce brewing: Both Haitian and Jonjee have built their

reputations locally over time. Looking back to 300 years ago, Haitian was already a

famous large-scale brewing store, with multiple SKUs selling to western and northern

图表 50: Haitian remains the only national player; other firmsare strong in particular regionsCompany revenue breakdown by region, 2017

图表 51: Exposure to high-growth channels: Channelbreakdown comparison (2017)

North 28%

South 22% South

44%

East 21%

East 25%

East 28%

Central 19%

Central 34%

Southwest 58%

0%10%20%30%40%50%60%70%80%90%

100%



70%

24%

0% 10% 20% 30% 40% 50% 60% 70% 80%

Haitian

Lee Kum Kee

Donggu

Jonjee

Qianhe

Jia Jia

Restaurant as % of total sales

Note: Overseas sales of Haitian is included in the southern China part



图表 52: Haitian has penetrated down to the county levelwhile Jonjee operates mostly at the prefecture level outsideof south ChinaNumber of distributors and POS

图表 53: Haitian has strong bargaining power withdistributors, and Jonjee provides higher margin tocompensate for volume differenceDistribution policy

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

0

500

1000

1500

2000

2500

3000

3500

4000

Haitian Jonjee

Number of first-tier distributors POS (RHS)Haitian Jonjee

Distributor relationship Strict requirement Stable

Margin GPM 10% NM 5-10%, similar to industry avg

Order policy

A/R days 0.5 11.4

Cash before delivery


2018年9月17日 27


Guangdong. In 2006, it was designated as the “China Time-Honored Brand” by the

Department of Commerce.

Jonjee, established in 1934, was the first company to market dark soy sauce and

became popular through its product differentiation.

Haitian’s 10X marketing budget to educate market on new products: In terms of

absolute A&P spending, Haitian’s budget is 10 times the size of Jia Jia/Jonjee’s. We

attribute this to two key factors: 1) Being the only national condiment player, Haitian

markets its brand on a national scale rather than at a regional level; the entertainment

programs it sponsors are popular, allowing Haitian to reach a large audience. 2) As an

industrial leader, Haitian educates consumers on how to use newly developed sauces.

As a result, most of its budget focuses on certain SKUs, e.g. seasoned soy sauce

(higher amino-acid content, stronger umami than normal soy sauce), oyster sauce, and

soybean sauce.

Jonjee using efficient spending to tackle its weakness: In comparison, Jonjee has not yet

become a national player, with more than 40% of its sales from southern China. Only

20% of its sales come from the restaurant channel. Consequently, Jonjee’s spending

focuses on: 1) building up the restaurant channel; and 2) enhancing brand awareness.

As a result, its campaigns have included the sponsorship of chef competitions and

product placements for its entire brand rather than single SKUs.

图表 54: Haitian leads in terms of brand investment toeducate the national marketA&P spending, 2017

图表 55: Campaign comparison: Haitian focuses on SKUswhile Jonjee focuses on brandHaitian and Jonjee campaigns

848

56 74

6%

2%

4%

0%

1%

2%

3%

4%

5%

6%

7%

0

100

200

300

400

500

600

700

800

900

Haitian Jonjee Jia Jia

Advertising spending (RMB mn) Advertising as % of sales Year 2016 2017 2018Soy sauce The next Who’s still standing Go fighting

I am the future Crossover singerFamiliar taste

Avg rating 1.7 0.9 1.1Oyster sauce Fighting man The brainAvg rating 0.9 1.1Soybean sauce Push the button If you are the one

Four big helpers The brainAvg rating 0.9 1.4Brand Familiar taste

Chinese restaurantAvg rating 0.9

Year 2017Soy sauce Star chefAvg rating 0.5Brand Hailing island marathon

Top chef clubAvg rating -

Haitian

Jonjee

资料来源：Company data 资料来源：Company data, tvtv.hk

2018年9月17日 28


#4 Incentive plans: Haitian aligns incentives to motivate and retain talent; Jonjeeis transforming into a more market-oriented companyHaitian - aligned incentives to reach short-term and long-term performance targets:

Cash incentives for Haitian’s management and average employees are the highest

among the major listed condiment players, which helps ensure that annual performance

targets are met. The 74% owned by management and employees and the restricted

stock unit awards with a four-year vesting period ensure that key talent focus on the

company’s long-term growth and seek to remain with the company. As a result,

Haitian’s workforce has the largest number of college graduates and above.

Nevertheless, the individual requirements to unlock the awards are challenging to some

extent. Only 38% of the eligible employees unlocked 90% of the first batch and 12%

unlocked less than 50%.

Jonjee - transforming into a more market-oriented company: On September 7, the 25%

held by Qian Hai Life Insurance company was entirely transferred to Zhongshan Runtian

Investment Co., which has become the biggest shareholder for Jonjee subsequently.

Zhongshan Torch Gaojishu Industry Development Zone Administration Committee owns

11%, and the public owns 64%. As an SOE company, incentive plans are not as flexible

as a private company like Haitian, and the cash incentives are generally in line with

peers. Management does not own shares in Jonjee, and stock options/RSUs are not a

图表 56: Haitian Premium Soy Sauce (海天味极鲜) SKUsponsored top entertainment show Crossover Singer (III)

图表 57: Product placement in food entertainment showChinese Restaurant by Haitian (海天) Sponsorship of entertainment show


图表 58: Product placement in food entertainment show XianChu Dang Dao by Jonjee’s Chubang (厨邦) Brand

图表 59: Jonjee’s Chubang (厨邦) brand sponsorship ofchef competition

资料来源：company data 资料来源：Company data

2018年9月17日 29


typical method to retain talent. However, Jonjee has also started to have an incentive

plan with a mixture of short-term and long-term targets (on revenue, net income and

ROE). Through this incentive plan, a total of Rmb23 mn has been rewarded to 210

employees.

图表 60: Management and employees are Haitian’s majorshareholders Shareholding structure (as of 1H18)

图表 61: Jonjee’s biggest shareholders are Jushenghuaand Zhongshan Torch Gaojishu Industry Development ZoneAdministration Committee Shareholding structure (Sept 7, 2018)

Mgmt and employees

100%Guangdong

Haitian GroupTop 12 mgmt

direct ownership Public

58% 16% 26%

Foshan Haitian (603288.SS)

Shenzhen Jushenghua

Co. Ltd.

Zhongshan Torch Gaojishu Industry

Development Zone Administration

Committee100% 100%

Zhongshan Runtian Investment Co.

Zhongshan Torch Group Public

25% 11% 64%

100% 79%Guangdong Meiweixian

Condiment Co.

Zhonghui Hechuang Real Estate Co.

80% 100%Guangdong

Chubang Food Co.Yangxi Meiweixian

Food Co.

Jonjee Hi-tech (600872.SS)


图表 62: Cash incentives for management (2017)Incentives for management

图表 63: Cash incentives for front-line employees (2017,Rmb/k)

74%

0%

42%

0%

10%

20%

30%

40%

50%

60%

70%

80%

0.00.51.01.52.02.53.03.54.04.55.0


CEO compensation (Rmb mn) Management ownership (RHS)

153

95 85

0

2040

60

80

100

120140160180


Average compensation (RMB/K)

Note: 74% shareholding of Haitian is owned by management and employees.



2018年9月17日 30


#5 Cost differential: Haitian has the lowest cost in the industry due to scalebenefits and a higher level of automationThe aggressive expansion plan (1mn ton expansion in 2005, 1.5mn ton expansion in

2010 and 2.2mn ton in 2017) has made Haitian a clear leader in the condiment sector. In

2017, Haitian’s production volume was five times the size of the second-biggest

player, creating significant operating leverage. In addition, if we compare the value and

volume produced by each manufacturing employee, Haitian is more than twice as big as

other listed players. On top of this, Haitian has been very efficient in terms of spending;

for example, its other admin costs, equivalent to 0.6% of its sales, are the lowest among

listed players. Economies of scale, a high level of automation, and leading efficiency

have made Haitian the lowest-cost player in the industry.

Benchmarking Haitian, we expect Jonjee to deliver margin improvement over time with

its scale expansion plan and upgrade to more automated factories.

图表 64: Stock incentives in Haitian to keep talentsHaitian incentive plan

图表 65: Haitian has the highest portion of employees withundergraduate degrees and aboveEmployees by education

Haitian# employees

Positions

RSUs granted30%, vesting after 20 months30%, vesting after 32 months40% vesting aafter 44 months

Grant datePerformance requirement1. Corporate revenue growth and net income growth

85

2. Individual performance review of 4 semi-annual review reached "pass" (unlock ratio less than 100%) or "good"

Batches

6.6mn

Nov-14

Research, marketing, manufacturing, engineering, management roles

52 49 7

2711

1472 389

0%10%20%30%40%50%60%70%80%90%

100%


Postgraduates / doctor Junior college / undergraduates Others


图表 66: Economies of scale (2017) 图表 67: Different level of automation (2017)Comparison of value and volume per manufacturing employee

9.4

2.0 1.9 1.7 1

0.01.02.03.04.05.06.07.08.09.0

10.0

Haitian Lee Kum Kee Jonjee Dong Gu Jia Jia

Volume index of the biggest players

0.01.02.03.04.05.06.07.08.09.0

Haitian Jia Jia Jonjee Hengshun

Value per manufacturing employee (RMB mn)Vol per manufacturing employee (K tons)


2018年9月17日 31


图表 68: Different practices in cost controlFinancial comparison (as of 2017)

Haitian Jonjee Jia JiaFinancial

ASP per ton 5,587 7,239 4,969COGS per ton 2,956 4,348 3,176

Raw material 2,624 3,696 2738Labor 76 327 143Depreciation 175 185 177Manufacturing & other 81 140 118

Selling expense ratio 13.4% 11.8% 8.9%A&P 5.8% 4.0% 3.9%Transport 4.3% 2.1% 1.2%Personnel 2.3% 3.0% 2.5%

Admin cost ratio 4.2% 9.6% 6.1%Personnel 0.8% 4.5% 1.4%R&D 2.8% 3.0% 1.3%Other 0.6% 2.2% 3.3%

OPM 26.2% 15.8% 15.6%


2018年9月17日 32


Valuation methodology and M&A framework

Valuation methodologyAs China’s condiment industry is still in its growth stage, we believe it is important to

factor in the long-term trends of both companies. Given the stronger visibility and lower

volatility of future earnings for both Haitian and Jonjee, we use a five-year earnings

outlook and 2023E P/E methodology to value both companies (in line with our white

spirits coverage). For Haitian, we use a 2023E P/E of 26X and discount it back to arrive

at our 12-month target price of Rmb81. For Jonjee, we adopt the SOTP method to

separate the value of profit from primarily the condiment segment (Rmb29.5, based on a

2023E P/E of 21X) and the discounted NAV of undeveloped properties (Rmb 1.6) to

obtain our 12-month target price of Rmb 31.1. Key assumptions for the property

valuation are shown in Exhibit 70.

Within our Chinese staples coverage, we expect Haitian to deliver top-tier sales growth

(a 2017-19E CAGR of 17%), best-in-class cash returns (33% in 2018-19E) and

above-average earnings growth (2017-19E CAGR of 23%), despite the fact that it is

already the biggest condiment player in China, with sales four times bigger than Jonjee.

We believe Jonjee also has the potential to grow its sales and earnings by 16% and

26%, respectively, which would be among the fastest in the sector; however, its cash

return is still lagging behind Haitian’s, at 18%. We believe Haitian, with its strong

growth and best cash returns, deserves a premium relative to Jonjee and other staples

companies. Our target price implies 2019 P/Es of 41X and 31X for Haitian and Jonjee,

respectively. Currently, Haitian and Jonjee are trading at 12-month forward P/Es of 37X

and 33X, respectively, vs. Kikkoman, a global condiment leader, at 41X (historical avg.

of 32X).

图表 69: We set a 12-month target price of Rmb81.0 for Haitian

Haitian 2018E 2019E 2020E 2021E 2022E 2023EEPS 1.62 1.98 2.39 2.89 3.47 4.16 Target PE 26 Target price 81.0 86.7 93.9 101.7 110.1 Current price A share (RMB) 68.0 Potential share price upside 19.1%Implied 2019E PE 41

Cost of Equity 8.3%

资料来源：Goldman Sachs Global Investment Research

2018年9月17日 33


图表 70: We set a 12-month target price of Rmb31.1 for Jonjee

Jonjee 2019ESOTP value 31.1Current price 29.0Upside 7%

Condiment and other 2017 2018E 2019E 2020E 2021E 2022E 2023EEPS 0.64 0.83 1.01 1.22 1.44 1.71 2.01PE 21Target value per share 29.5 32.3 35.3 38.5 42.1

30.9 Cost of equity 9.3%

NAV of undeveloped property Jonjee Hechuang AssumptionsAverage selling price (RMB/sqm) 10,000 10,000 SG&A ratio 4.0%Unsold land bank (sqm) 450,225 1,150,575 Business tax 5.5%Revenue (RMB mn) 4,502 11,506 Income tax 25%Land cost (RMB/sqm) 780 690 WACC 8.4%Construction unit cost (RMB/sqm) 3,500 3,500 Discount to NAV 40%SG&A (RMB mn) 180 460LTA (RMB mn) 638 1,631Income tax (RMB mn) 627 1,603 NAV 2,058Total cash flow 1,310.7 3,450.6 NAV/share 2.6Cash flow attributed to Jonjee 1,310.7 2,726.0 Target value/share 1.6

资料来源：Goldman Sachs Global Investment Research

图表 71: Comparison of key metrics 图表 72: Haitian is trading at 37XForward 12m P/E for Haitian

Ticker Company nameSales CAGR

2017-19ECROCI

2018-19EEPS CAGR 2017-19E

603288.SS Haitian Flavouring 17% 33% 23%1112.HK H&H 23% 20% 19%

600887.SS Inner Mongolia Yili 15% 28% 16%600872.SS Jonjee Hi-tech 16% 18% 26%3799.HK Dali Foods 11% 24% 15%2319.HK Mengniu Dairy 12% 10% 27%0291.HK China Resources Beer 9% 8% 39%0322.HK Tingyi 6% 13% 38%0220.HK UPC 6% 11% 21%0151.HK Want Want 6% 18% 1%1458.HK Zhou Hei Ya 4% 16% -8%0288.HK WH Group 4% 15% 8%

600597.SS Bright Dairy 3% 14% 5%0168.HK Tsingtao Brewery (H) 2% 9% 16%1117.HK China Modern Dairy -2% 8% 0%

36.7

15.0

20.0

25.0

30.0

35.0

40.0

45.0

Feb-

14

Aug-

14

Feb-

15

Aug-

15

Feb-

16

Aug-

16

Feb-

17

Aug-

17

Feb-

18

Aug-

18

Haitian Fwd 12m P/E

Hist. avg 28X

+ 1 STDV

+ 2 STDV

- 1 STDV

- 2 STDV

Note: Dark blue means the company ranks in the first quartile for the criteria,light blue second quartile, light grey third quartile and dark grey fourth quartile.


资料来源：Bloomberg

2018年9月17日 34


M&A frameworkAcross our global coverage, we examine stocks using an M&A framework, considering

both qualitative and quantitative factors (which may vary across sectors and regions) to

incorporate the potential that certain companies could be acquired. We then assign an

M&A rank as a means of scoring companies under our rated coverage from 1 to 3, with

1 representing high probability (30%-50%) of the company becoming an acquisition

target, 2 representing medium probability (15%-30%) and 3 representing low probability

(0%-15%). For companies ranked 1 or 2, in line with our standard departmental

guidelines we incorporate an M&A component into our target price. An M&A rank of 3 is

considered immaterial and therefore does not factor into our target price, and may or

may not be discussed in research.

图表 73: Jonjee is trading at 33.1X Forward 12m P/E for Jonjee

图表 74: Kikkoman is trading at 41XFwd 12m P/E for Kikkoman

33.1

18.0

23.0

28.0

33.0

38.0

Mar

-13

Sep-

13

Mar

-14

Sep-

14

Mar

-15

Sep-

15

Mar

-16

Sep-

16

Mar

-17

Sep-

17

Mar

-18

Jonjee Fwd 12m P/E

Hist. avg 28X

+ 1 STDV

+ 2 STDV

- 1 STDV

- 2 STDV

41.3

15.0

20.0

25.0

30.0

35.0

40.0

45.0

50.0

Mar

-13

Jun-

13Se

p-13

Dec

-13

Mar

-14

Jun-

14Se

p-14

Dec

-14

Mar

-15

Jun-

15Se

p-15

Dec

-15

Mar

-16

Jun-

16Se

p-16

Dec

-16

Mar

-17

Jun-

17Se

p-17

Dec

-17

Mar

-18

Jun-

18

Kikkoman Fwd 12m P/E

Hist. avg 32X

+ 1 STDV

+ 2 STDV

- 1 STDV

- 2 STDV

资料来源：Bloomberg 资料来源：Bloomberg

图表 75: Condiment comp sheet (price as of Sep 14, 2018)

BBG Ticker Name Mkt Cap Last GS EPS 17-19E PE PE PEG EV/EBITDA EV/EBITDA Div Yield ROEClose Rating 6M Chg CAGR CY18E CY19E 2Yr CY18E CY19E CY18E CY18E

US$m Price % % (X) (X) CAGR (X) (X) % %China Condiment

603288 CH Haitian 27,000.7 68.5 Buy 15.4 23.2 42.2 34.5 2.3 33.7 27.4 1.4 34.6 600872 CH Jonjee 3,319.6 28.7 Neutral 13.6 26.2 36.2 31.7 1.9 24.7 21.3 0.9 17.1 002507 CH Fuling Zhacai 2,596.8 22.7 NC 35.1 36.6 29.5 23.3 1.2 na na 0.8 25.9 600305 CH Hengshun Vinegar 1,072.1 9.4 NC 17.4 5.2 25.6 23.7 5.0 na na 1.0 14.0 Average 8,497 23.0 38.0 31.5 2.3 26.6 21.7 1.4 29.9

Global leadersKHC US Kraft Heinz 71,894.6 59.0 Neutral (9.8) 4.0 15.8 15.4 4.1 13.3 12.8 4.4 6.9 MKC US McCormick 17,355.4 132.3 Neutral 22.7 12.3 26.6 24.6 2.5 19.5 17.9 1.6 25.4 CAG US ConAgra 14,980.4 38.3 NR 4.5 14.6 17.7 17.1 1.5 12.6 12.5 2.3 21.9 2801 JP Kikkoman 10,768.4 6,220 Neutral 43.5 12.9 44.6 39.6 3.9 14.9 21.8 0.7 9.6 2802 JP Ajinomoto 9,600.0 1,880 Neutral (3.9) 12.4 17.8 16.2 1.6 9.8 8.6 1.7 8.6 2809 JP Kewpie 3,493.2 2,608 Buy (13.6) 9.8 19.8 17.9 2.2 8.5 7.7 1.5 7.1 Average 16,768 10.1 24.9 22.4 1.3 12.3 12.5 1.7 11.1

China Staples600887 CH Yili 20,560.4 23 Buy (25.0) 16.2 21.5 17.4 1.5 15.4 12.4 3.3 24.9 291 HK CR Beer 12,360.4 30 Buy* (11.3) 39.1 34.7 26.2 1.3 18.8 11.9 0.9 9.5 2319 HK Mengniu Dairy 11,185.3 22 Neutral (10.5) 26.5 29.8 23.0 1.4 16.8 13.6 0.9 10.3 322 HK Tingyi 9,506.5 13 Buy (15.3) 37.7 27.1 21.6 1.1 10.8 9.4 2.1 11.8 1112 HK H&H International 3,583.9 44 Buy (18.4) 18.3 19.0 16.6 1.3 10.7 8.9 0.5 24.3 Average 11,439 27.6 26.4 21.0 1.3 14.5 11.3 1.5 16.2

Price

资料来源：Bloomberg, Goldman Sachs Global Investment Research

2018年9月17日 35


We assign an overall M&A score of 3 for both Haitian and Jonjee, which denotes low

probability (0%-15%) of being acquired, which is consistent with our regional M&A

framework of “Can”, “Should” and “Would”:

Can

Size: Companies that are very large in market cap are less likely to be M&A targets.n

Ownership: Blocking stakes by MNC parents and family owners are a meaningfuln

barrier against M&A activity for many of our covered companies.

Regulatory risk: Dominant players, particularly in oligopolistic markets or industriesn

that are more state-controlled, such as tobacco, have higher regulatory risk.

Should

Growth potential: Companies with strong EBITDA growth are more attractive targets.n

Industry positioning: Dominant positioning makes a company more attractive as an

target, particularly in competitive markets where regulatory risk is relatively low.

Cost synergies: We rank cost structures based on the potential for improvement, byn

our assessments, with low representing low opportunity for cost improvement.

Valuation: We assess EV/EBITDA to evaluate asset attractiveness.n

Would

Strategic appeal: Some companies own assets (such as brands and distributionn

networks) that have strategic appeal for acquirers; we rank companies as low

(minimal or no strategic appeal), medium (some appeal) and high (high appeal).

Management stance: Given that many companies under our coverage are still familyn

businesses or subsidiaries of MNC parents, management’s stated and

demonstrated willingness to engage in M&A is an important barrier; we rank

companies based on our assessment of willingness, with low representing

unwillingness, medium representing open to consideration and high representing

willingness and/or demonstrated selling of a stake in the past.

Foshan Haitian M&A rankingCan: With a c.US$27bn market cap, Haitian is one of the biggest staples companies in

China. However, with a majority shareholding stake held by top management, we

believe there is very limited possibility of Haitian being acquired.

Should: Haitian is a clear leader in a relatively fragmented market, with only 16% market

share in 2017. It may also be able to generate some cost synergy by expanding its

product distribution area without significant costs.

Would: The controlling shareholders make up the top management of the company. The

CEO is also the chairman of the board, and together with another four top managers

within the company, acts in concert. This would suggest a low intention of being

acquired.

2018年9月17日 36


Jonjee Hi-Tech M&A rankingCan: Jonjee has a free float of 77%. However, given its SOE nature, we believe there is

limited possibility of Jonjee being acquired without permission from the government.

Should: We expect Jonjee to grow quickly over the next two years, and its brands are

well-established in Southern China. The industry remains relatively fragmented, and

Jonjee had only 4% market share in 2017. Besides, its current cost structure still has

room for improvement.

Would: Jonjee is still not a nationally recognized brand yet, and its distribution system is

still expanding rather than being well established nationally. Management has not shown

willingness to engage in M&A activities.

For complete details on our M&A framework, see our report, Asia Pacific: Consumer &

Retail: Introducing M&A Framework; 10 stocks highlighted), published on July 5, 2016

图表 76: We rank Foshan Haitian and Jonjee Hi-Tech at 3 (least likely) to be an M&A targetM&A framework

TOTAL

Ticker Company name Size RegulationScore (1-

3)Industry

positioningCost

synergiesScore (1-3)

Strategic appeal

Management stance

Score (1-3)

Score (1-3)

Market Cap ($mn) % Free Float

Risk of restrictions

1 = M&A likely

EBITDA CAGR (2017-19E) Yes/No

1 = M&A likely

1 = M&A likely

1 = M&A likely

Condiment603288.SS Foshan Haitian 26,819 15% Low 3 24% Top Tier, Competitive Low 3 Low Low 3 3600872.SS Jonjee Hi-tech 3,366 77% Low 3 22% Top Tier, Competitive Med 2 Low Low 3 3

Growth Potential

Company CAN SHOULD WOULD

Ownership


2018年9月17日 37


https://research.gs.com/content/research/en/reports/2016/07/05/96b13534-9019-45c7-8691-472183506ccd.pdf

https://research.gs.com/content/research/en/reports/2016/07/05/96b13534-9019-45c7-8691-472183506ccd.pdf

COMPANY PROFILES

2018年9月17日 38


Haitian: Clear leadership to foster healthy industry growth; initiate atBuy

FinancialsFoshan Haitian is the clear leader of China’s condiment sector, with sales that are four

times bigger than Jonjee’s. Despite Haitian’s huge size, we forecast it will deliver a

growth rate slightly higher than that of peers, at a 2017-19E CAGR of 17%. In the

coming two years, we expect soy sauce will remain the biggest contributor of

incremental sales (Rmb3 bn). We attribute this to Haitian’s majority exposure to the

high-growth restaurant channel, national distribution, and significant brand investment.

In addition, we estimate liquid state soy sauce accounts for only 25% of the soy sauce

market, and given the relatively small ticket size, low purchase frequency, and relatively

strong benefits to enrich the flavor of dishes, we expect a continued consumption

upgrade in the soy sauce segment to benefit brands using liquid-state fermentation,

primarily Guangdong brands such as Haitian and Jonjee.

We estimate other sauces and oyster sauce will contribute another Rmb 0.6 bn and

Rmb 1 bn in incremental sales by 2019E compared to 2017, benefiting from the

leverage of the Haitian brand’s nationally established reputation.

Profitability to continue rising: We expect OPM to increase by 270bps by 2019E, thanks

to: 1) Haitian’s strong bargaining power, which allows it to hike ASPs in order to pass

on inflation (we expect the next hikes will be in 2019E); and 2) a gradual mix upgrade.

For this year, costs are relatively stable, with a favourable price trend for key raw

materials (e.g., sugar) and price locking of NGM soybeans early this year, delaying the

potential impact from any US trade frictions.

图表 77: Haitian snapshot

GS Forecast12/17 12/18E 12/19E 12/20E

Market cap: Rmb187.2bn / $27.3bn Revenue (Rmb mn) New 14,584.3 17,071.8 20,032.4 23,442.4Enterprise value: Rmb179.7bn / $26.2bn Revenue (Rmb mn) Old -- -- -- --

3m ADTV :Rmb270.0mn/ $40.2mn EBITDA (Rmb mn) 4,383.2 5,334.1 6,481.3 7,783.5

China EPS (Rmb) New 1.31 1.62 1.98 2.39EPS (Rmb) Old -- -- -- --

P/E (X) 30.9 42.7 34.9 29.0

P/B (X) 9.3 13.8 11.9 10.2

Dividend yield (%) 2.1 1.4 1.7 2.1

CROCI (%) 28.9 32.1 33.5 34.1

6/18 9/18E 12/18E 3/19EEPS (Rmb) 0.38 0.33 0.47 0.54

Source: Company data, Goldman Sachs Research estimates, FactSet. Price as of 14 Sep 2018 close.

12m Price Target: Rmb81 Price: Rmb69.31 Upside: 16.9%

Buy

China Consumer Products

603288.SS

资料来源：Company data, Goldman Sachs Global Investment Research, FactSet

2018年9月17日 39


图表 78: Haitian’s sales were four times bigger thanJonjee’s in 2017

图表 79: We expect Haitian to grow slightly faster than JonjeeSales growth yoy

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

Haitian Jonjee Jia Jia Hengshun

Sales size (RMB mn)

-15%-10%-5%0%5%

10%15%20%25%30%

Haitian Hengshun Jonjee - condimentSales yoy

资料来源：Company data 资料来源：Company data, Goldman Sachs Global Investment Research

图表 80: We expect both Haitian and Jonjee will seeimproving margins in 2018-2020EOPM comparison

图表 81: We expect a steady ASP increase for Haitian fromboth direct price hikes and mix upgradeASP of Haitian sub-segments

0%

5%

10%

15%

20%

25%

30%

35%Haitian Hengshun JonjeeOPM

3

4

5

6

7

8

9

10

2010 2011 2012 2013 2014 2015 2016 2017 2018E2019E2020E

Soy sauce Oyster sauce Other saucesRMB K/ton

资料来源：Company data, Goldman Sachs Global Investment Research 资料来源：Company data, Goldman Sachs Global Investment Research

图表 82: Soy sauce remains the most important driver ofHaitian’s revenue growthIncremental sales by segment

图表 83: We expect improving margin for all segmentsOPM by segment

20.0

14.6

3.0 0.6 1.0

0.9

1213141516171819202122

2017 Sales Soy sauce Othersauce

Oystersauce

Others 2019ESales

Revenue contribution (RMB bn)

0%

5%

10%

15%

20%

25%

30%

35%

2014 2015 2016 2017 2018E 2019E 2020E

Soy sauce Other Sauce Oyster sauce Total


2018年9月17日 40


图表 84: Soybeans and sugar are the most important rawmaterials for HaitianCOGS breakdown (2017)

图表 85: Domestic NGM soybean price declined slightly yoy,but is up vs. early 2018NGM soybean price

Soybean, 18%

Sugar, 14%

PET, 12% Glass,

13% MSG, 8%

Pulp, 5%

Others, 31%

Haitian COGS breakdown

-40%-30%-20%-10%0%10%20%30%40%

2,500

3,000

3,500

4,000

4,500

5,000

5,500

Jan-

10Ju

l-10

Jan-

11Ju

l-11

Jan-

12Ju

l-12

Jan-

13Ju

l-13

Jan-

14Ju

l-14

Jan-

15Ju

l-15

Jan-

16Ju

l-16

Jan-

17Ju

l-17

Jan-

18Ju

l-18

NGM soybean % NGM soybean Rmb/ton

资料来源：Company data 资料来源：Wind

图表 86: Sugar price has declined by more than 20% recentlySugar price

-50%-40%-30%-20%-10%0%10%20%30%40%50%

4,0004,5005,0005,5006,0006,5007,0007,5008,000

Jan-

10Ju

l-10

Jan-

11Ju

l-11

Jan-

12Ju

l-12

Jan-

13Ju

l-13

Jan-

14Ju

l-14

Jan-

15Ju

l-15

Jan-

16Ju

l-16

Jan-

17Ju

l-17

Jan-

18Ju

l-18

Sugar % Sugar Rmb/ton

资料来源：Wind

2018年9月17日 41


图表 87: We expect soy sauce, other sauce and oyster sauce to deliver double-digit growth in 2017-19E Summary financials

Foshan Haitian (603288.SS)Rmb millionsDivisional P/L FY14 FY15 FY16 FY17 FY18E FY19E FY20E FY21E FY22E FY23E 17-’19E

2yr CAGRRevenuesSoy sauce 6,299 6,716 7,579 8,836 10,211 11,858 13,735 15,844 18,278 21,085 15.8%Other Sauce 1,533 1,813 1,814 2,040 2,289 2,595 2,912 3,267 3,665 4,075 12.8%Oyster sauce 1,338 1,777 1,863 2,266 2,697 3,236 3,867 4,602 5,430 6,407 19.5%Others 647 988 1,203 1,442 1,875 2,343 2,929 3,515 4,218 5,062 27.5%

9,817 11,294 12,459 14,584 17,072 20,032 23,442 27,228 31,591 36,630 17.2%

Gross ProfitSoy sauce 2,640 2,977 3,603 4,376 5,227 6,169 7,231 8,484 9,925 11,605 18.7%Other Sauce 625 799 811 926 1,065 1,241 1,407 1,594 1,801 2,018 15.8%Oyster sauce 471 656 712 887 1,103 1,356 1,646 2,013 2,435 2,943 23.6%Others 231 305 349 475 655 865 1,140 1,438 1,810 2,274 35.0%

3,967 4,737 5,475 6,664 8,050 9,631 11,424 13,529 15,972 18,840 20.2%

BreakdownRevenues (external only)Soy sauce 64% 59% 61% 61% 60% 59% 59% 58% 58% 58%Other Sauce 16% 16% 15% 14% 13% 13% 12% 12% 12% 11%Oyster sauce 14% 16% 15% 16% 16% 16% 16% 17% 17% 17%Others 7% 9% 10% 10% 11% 12% 12% 13% 13% 14%

100% 100% 100% 100% 100% 100% 100% 100% 100% 100%

YoY Growth (%) FY14 FY15 FY16 FY17 FY18E FY19E FY20E FY21E FY22E FY23ERevenuesSoy sauce 13% 7% 13% 17% 16% 16% 16% 15% 15% 15%Other Sauce 32% 18% 0% 12% 12% 13% 12% 12% 12% 11%Oyster sauce 20% 33% 5% 22% 19% 20% 20% 19% 18% 18%Others 19% 53% 22% 20% 30% 25% 25% 20% 20% 20%

17% 15% 10.3% 17.1% 17.1% 17.3% 17.0% 16.1% 16.0% 15.9%

Margins FY14 FY15 FY16 FY17 FY18E FY19E FY20E FY21E FY22E FY23E pptGross ProfitSoy sauce 41.9% 44.3% 47.5% 49.5% 51.2% 52.0% 52.6% 53.5% 54.3% 55.0% 2.5%Other Sauce 40.8% 44.1% 44.7% 45.4% 46.5% 47.8% 48.3% 48.8% 49.1% 49.5% 2.5%Oyster sauce 35.2% 36.9% 38.2% 39.1% 40.9% 41.9% 42.6% 43.7% 44.8% 45.9% 2.8%Others 35.6% 30.8% 29.1% 32.9% 34.9% 36.9% 38.9% 40.9% 42.9% 44.9% 4.0%

40.4% 41.9% 43.9% 45.7% 47.2% 48.1% 48.7% 49.7% 50.6% 51.4% 2.4%


2018年9月17日 42


Balance sheet and cash flowHaitian led the implementation of a cash for goods policy (zero A/R day), and other

players in the condiment industry gradually followed. As such, the company has

maintained zero long-term borrowing since 2010 and reached a net cash position of

Rmb5.6 bn in 2017. In 2018-2020E, we expect Haitian to achieve more than Rmb4 bn in

free cash flow, generate a cash return of more than 32%, and give back to investors with

a 60% dividend payout ratio.

图表 88: We expect Haitian to improve its OPM by 270bps and reach a two-year EPS CAGR of 23% by 2019E Summary financials

Consolidated P/L (Rmb mn) FY14 FY15 FY16 FY17 FY18E FY19E FY20E FY21E FY22E FY23E 17-’19E 2yr CAGR

Revenue 9,817 11,294 12,459 14,584 17,072 20,032 23,442 27,228 31,591 36,630 17.2%COGS -5,850 -6,557 -6,983 -7,921 -9,022 -10,401 -12,019 -13,699 -15,619 -17,790 GP 3,967 4,737 5,475 6,664 8,050 9,631 11,424 13,529 15,972 18,840 20.2%SG&A (excl. other rev/exp) (1,610) (1,867) (2,206) (2,722) (3,192) (3,679) (4,231) (4,838) (5,528) (6,328)

Selling Exp. (1,050) (1,227) (1,560) (1,957) (2,287) (2,623) (3,000) (3,416) (3,884) (4,431)Admin Exp. (487) (535) (520) (607) (719) (837) (975) (1,125) (1,298) (1,498)

OP 2,356 2,870 3,269 3,941 4,858 5,952 7,193 8,691 10,444 12,511 22.9%Other income/expenses 0 0 0 0 0 0 0 0 0 0EBIT (reported) 2,356 2,870 3,269 3,941 4,858 5,952 7,193 8,691 10,444 12,511 22.9%D&A (283) (354) (381) (442) (476) (529) (591) (657) (723) (789)EBITDA 2,639 3,223 3,650 4,383 5,334 6,481 7,784 9,348 11,167 13,300 21.6%

Net Finance Exp. 49 49 46 82 138 184 241 309 395 521Other Non-Op Income 87 93 98 192 239 261 284 310 339 370Profit Before Tax 2,492 3,011 3,413 4,215 5,235 6,397 7,718 9,311 11,178 13,402 23.2%Tax -402 -502 -570 -684 -849 -1038 -1252 -1510 -1813 -2174Minority Interest 0 0 0 0 0 0 0 0 0 0NPAT Attributable to S/holders 2,090 2,510 2,843 3,531 4,386 5,359 6,466 7,800 9,365 11,228 23.2%One-off’s after taxRecurring NPAT 2,090 2,510 2,843 3,531 4,386 5,359 6,466 7,800 9,365 11,228 23.2%

EPS - Basic (Rmb/Sh) 1.89 1.19 1.05 1.31 1.62 1.98 2.39 2.89 3.47 4.16 EPS - Diluted (Rmb/Sh) 1.39 0.93 1.05 1.31 1.62 1.98 2.39 2.89 3.47 4.16 23.2%

Growth Sales 17% 15% 10.3% 17.1% 17.1% 17.3% 17.0% 16.1% 16.0% 15.9%GP 20% 19% 16% 22% 21% 20% 19% 18% 18% 18%SG&A 14% 16% 18% 23% 17% 15% 15% 14% 14% 14%Operating profit (GP less SG&A) 25% 22% 14% 21% 23% 23% 21% 21% 20% 20%EBIT 25% 22% 14% 21% 23% 23% 21% 21% 20% 20%Reported NPAT 30% 20% 13% 24% 24% 22% 21% 21% 20% 20%Recurring NPAT 30% 20% 13% 24% 24% 22% 21% 21% 20% 20%

MarginsGP margin 40.4% 41.9% 43.9% 45.7% 47.2% 48.1% 48.7% 49.7% 50.6% 51.4% 2.4%Operating profit (GP less SG&A) 24.0% 25.4% 26.2% 27.0% 28.5% 29.7% 30.7% 31.9% 33.1% 34.2% 2.7%EBIT margin 24.0% 25.4% 26.2% 27.0% 28.5% 29.7% 30.7% 31.9% 33.1% 34.2% 2.7%Reported NPAT margin 21.3% 22.2% 22.8% 24.2% 25.7% 26.8% 27.6% 28.6% 29.6% 30.7% 2.5%

SG&A/Sales -16.4% -16.5% -17.7% -18.7% -18.7% -18.4% -18.0% -17.8% -17.5% -17.3% 0.3%Effective Tax Rate -16% -17% -17% -16% -16% -16% -16% -16% -16% -16%


2018年9月17日 43


Key risks1. Deteriorating industrial environment if expansion plans proceed too quickly: Major

condiment players (including Haitian, Jonjee, and Master) have said they intend to

increase their capacity by 50% over the next three years. If these companies expand too

quickly, they may create over-supply in the price competition.

2. Unfavorable cost trend: An unexpected natural disaster or the imposition of tariffs on

global trade may lead to a rise in major raw materials.

3. Slower pace for ASP hikes if there is an economic slowdown: Even though condiment

demand is relatively inelastic, an economic slowdown may lead to the inability to raise

prices due to affordability issues.

4. Shareholding stake sell-down post the end of the lock-down period in 1Q2019.

图表 89: We expect Haitian to deliver above 32% cashreturns...Return on equity and CROCI

图表 90: ...and continue its above-60% dividend payout policygiven its strong free cash flowsFree cash flows and dividend payout

28%

31% 30%

32% 35% 37%

38%

23%

27% 29% 29%

32% 34% 34%

20% 22% 24% 26% 28% 30% 32% 34% 36% 38% 40%

2014 2015 2016 2017 2018E 2019E 2020E

Return on equity (%) CROCI

-

10%

20%

30%

40%

50%

60%

70%

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

2014 2015 2016 2017 2018E 2019E 2020E

Free cash flows Dividend payout ratio


图表 91: Haitian capacity expansion plans

Company HaitianYear 2017 2019 2021 2023Unit: (K tons) Actual Guidance Guidance GuidanceSoy sauce 1,848 +600 +600 +300

Oyster sauce 45 - - -

Soy derivatives 302 +100 +100 +100

Others 307 Compound sauce +200

Compound sauce+100

Compound sauce +100


2018年9月17日 44


图表 92: Haitian summary financials

Profit model (Rmb mn) 12/17 12/18E 12/19E 12/20E Balance sheet (Rmb mn) 12/17 12/18E 12/19E 12/20E

Total revenue 14,584.3 17,071.8 20,032.4 23,442.4 Cash & equivalents 5,612.9 7,494.8 9,803.7 12,576.0Cost of goods sold (7,920.7) (9,022.2) (10,401.2) (12,018.9) Accounts receivable 19.0 22.3 26.1 30.6SG&A (2,320.7) (2,721.7) (3,127.6) (3,585.0) Inventory 1,041.1 1,185.9 1,367.2 1,579.8R&D (401.7) (470.2) (551.7) (645.6) Other current assets 5,121.4 5,121.4 5,121.4 5,121.4

O Other operating profit/(expense) -- -- -- -- Total current assets 11,794.4 13,824.3 16,318.3 19,307.8EBITDA 4,383.2 5,334.1 6,481.3 7,783.5 Net PP&E 4,264.8 4,495.6 4,796.0 5,152.9

D Depreciation & amortization (441.9) (476.4) (529.4) (590.7) Net intangibles 181.8 210.8 244.9 284.9EBIT 3,941.2 4,857.7 5,951.9 7,192.9 Total investments 4.8 219.8 456.3 716.5Interest income 82.6 138.1 184.4 241.2 Other long-term assets 90.2 90.2 90.2 90.2Interest expense (0.6) 0.0 0.0 0.0 Total assets 16,336.0 18,840.7 21,905.7 25,552.1

I Income/(loss) from uncons. subs. -- -- -- --Others 192.1 239.0 260.5 284.2 Accounts payable 1,828.9 2,206.8 2,544.1 2,939.8Pretax profits 4,215.3 5,234.8 6,396.8 7,718.2 Short-term debt -- -- -- --Income tax (683.8) (849.2) (1,037.7) (1,252.1) Other current liabilities 2,685.3 3,020.6 3,604.7 4,268.9Minorities 0.0 0.0 0.0 0.0 Total current liabilities 4,514.2 5,227.4 6,148.8 7,208.7

Long-term debt -- -- -- --N Net income pre-preferred dividends 3,531.4 4,385.6 5,359.0 6,466.1 Other long-term liabilities 57.7 57.7 57.7 57.7

Preferred dividends -- -- -- -- Total long-term liabilities 57.7 57.7 57.7 57.7N Net income (pre-exceptionals) 3,531.4 4,385.6 5,359.0 6,466.1 Total liabilities 4,571.8 5,285.1 6,206.4 7,266.4

Post-tax exceptionals -- -- -- --Net income 3,531.4 4,385.6 5,359.0 6,466.1 Preferred shares -- -- -- --

Total common equity 11,753.3 13,544.7 15,688.3 18,274.8EPS (basic, pre-except) (Rmb) 1.31 1.62 1.98 2.39 Minority interest 10.8 10.9 10.9 11.0EPS (basic, post-except) (Rmb) 1.31 1.62 1.98 2.39

E EPS (diluted, post-except) (Rmb) 1.31 1.62 1.98 2.39 Total liabilities & equity 16,336.0 18,840.7 21,905.7 25,552.1DPS (Rmb) 0.85 0.97 1.19 1.44Dividend payout ratio (%) 65.0 60.0 60.0 60.0 BVPS (Rmb) 4.35 5.01 5.81 6.77Free cash flow yield (%) 4.1 2.4 2.8 3.4

Growth & margins (%) 12/17 12/18E 12/19E 12/20E Ratios 12/17 12/18E 12/19E 12/20ESales growth 17.1 17.1 17.3 17.0 CROCI (%) 28.9 32.1 33.5 34.1EBITDA growth 20.1 21.7 21.5 20.1 ROE (%) 32.4 34.7 36.7 38.1EBIT growth 20.6 23.3 22.5 20.9 ROA (%) 23.7 24.9 26.3 27.2Net income growth 24.2 24.2 22.2 20.7 ROACE (%) 63.1 69.9 87.1 108.0EPS growth 24.4 24.2 22.2 20.7 Inventory days 45.6 45.0 44.8 44.7Gross margin 45.7 47.2 48.1 48.7 Receivables days 0.3 0.4 0.4 0.4EBITDA margin 30.1 31.2 32.4 33.2 Payable days 78.8 81.6 83.4 83.3EBIT margin 27.0 28.5 29.7 30.7 Net debt/equity (%) (47.7) (55.3) (62.4) (68.8)

Interest cover - EBIT (X) NM NM NM NM

Cash flow statement (Rmb mn) 12/17 12/18E 12/19E 12/20E Valuation 12/17 12/18E 12/19E 12/20EN Net income pre-preferred dividends 3,531.4 4,385.6 5,359.0 6,466.1

D&A add-back 441.9 476.4 529.4 590.7 P/E (analyst) (X) 30.9 41.8 34.2 28.4M Minorities interests add-back 0.0 0.0 0.0 0.0 P/B (X) 9.3 13.5 11.7 10.0N Net (inc)/dec working capital 1,004.8 229.9 152.2 178.6 EV/EBITDA (X) 23.6 33.0 26.8 21.9

O Other operating cash flow (257.3) -- -- -- EV/GCI (X) 7.3 10.7 9.1 7.5C Cash flow from operations 4,721.0 5,091.9 6,040.6 7,235.4 Dividend yield (%) 2.1 1.4 1.8 2.1

Capital expenditures (262.0) (736.2) (863.9) (987.5)Acquisitions (23.3) -- -- --Divestitures -- -- -- --Others (2,174.2) (215.0) (236.5) (260.2)

C Cash flow from investments (2,459.5) (951.2) (1,100.4) (1,247.7)

D Dividends paid (common & pref) (1,839.4) (2,296.0) (2,631.3) (3,215.4)Inc/(dec) in debt (17.4) -- -- --

C Common stock issuance (repurchase) -- -- -- --O Other financing cash flows 11.7 37.2 -- --

Cash flow from financing (1,845.1) (2,258.9) (2,631.3) (3,215.4)Total cash flow 416.3 1,881.8 2,308.9 2,772.4 Note: Last actual year may include reported and estimated data.

Source: Company data, Goldman Sachs Research estimates.


2018年9月17日 45


Jonjee: Riding the wave of premiumization; initiate at Neutral

Condiment businessWe expect Jonjee will be a key beneficiary of premiumization. In southern China, it has

already become a well-recognized brand, selling premium soy sauce that contains 1.3g

of amino acids per 100ml and is fermented for 180 days. Jonjee has also expanded to

other categories such as oyster sauce, vinegar and cooking oil, which grew by c.30%

yoy in 1H18.

Looking ahead, we expect Jonjee to grow sales 16% in 2017-19E, primarily due to its

national expansion, which we expect will be driven by an increasing contribution from

the restaurant channel and steady growth in the size of Jonjee’s distributors.

At the same time, we expect Jonjee will benefit from improving profitability as result of

operating leverage and increased efficiency. In 2017-19E, we expect GPM to expand

130bps and OPM to expand 240bps on the back of: 1) labor, manufacturing and other

cost savings from plant upgrades; and 2) operating leverage on overhead costs, which

we estimate will reduce admin cost to 8.8% as a percentage of sales in 2019E vs. 9.6%

in 2017.

图表 93: Jonjee snapshot

GS Forecast12/17 12/18E 12/19E 12/20E

Market cap: Rmb22.1bn / $3.2bn Revenue (Rmb mn) New 3,609.4 4,321.8 4,830.0 5,552.8Enterprise value: Rmb22.9bn / $3.3bn Revenue (Rmb mn) Old -- -- -- --

3m ADTV :Rmb174.1mn/ $25.8mn EBITDA (Rmb mn) 700.6 930.4 1,073.6 1,299.9

China EPS (Rmb) New 0.57 0.79 0.91 1.11EPS (Rmb) Old -- -- -- --

P/E (X) 33.5 35.0 30.7 25.1

P/B (X) 4.8 6.2 5.4 4.7

Dividend yield (%) 0.9 0.9 1.0 1.3

CROCI (%) 16.1 18.3 18.2 19.1

6/18 9/18E 12/18E 3/19EEPS (Rmb) 0.21 0.22 0.14 0.24

Source: Company data, Goldman Sachs Research estimates, FactSet. Price as of 14 Sep 2018 close.

12m Price Target: Rmb31.1 Price: Rmb27.8 Upside: 11.9%

Neutral

China Consumer Products

600872.SS

资料来源：Company data, Goldman Sachs Global Investment Research, FactSet

2018年9月17日 46


Real estate businessJonjee and its subsidiary Zhonghui Hechuang own a c.1,600K sqm residential land bank

in Zhongshan City. However, the company’s real estate development is subject to the

government’s plans for Qijiang New Town, which have not yet been finalized. As a

result, a clear timeline for relevant projects has not yet been set. In 2017, the company

began the construction of 90K sqm of residential apartments outside of the Qijiang New

Town.

Since the early 1990s, the company has also been the operator of the Zhongshan Torch

Gaojishu Industry Development Zone. It owns factories, dormitories, and other ancillary

facilities within the zone (c.250K sqm) and obtains stable rental returns from these

facilities.

图表 94: Jonjee still relies heavily on the south China marketCompany revenue breakdown by region, 2017

图表 95: We expect condiments to contribute most ofJonjee’s sales growthSales contribution

North 28%

South 22% South

44%

East 21%

East 25%

East 28%

Central 19%

Central 34%

Southwest 58%

0%10%20%30%40%50%60%70%80%90%

100%



11%

19%

15% 17%

15%

0%

5%

10%

15%

20%

25%

0

1,000

2,000

3,000

4,000

5,000

6,000

2015 2016 2017 2018E 2019E 2020E

Soy sauce Other condimentReal estate Condiment overall YOY

RMB mn

Note: Overseas sales of Haitian is included in the southern China part



图表 96: We expect Jonjee to grow its profitability over timeGPM and OPM trend

图表 97: Comparison of cost control practicesFinancial comparison (as of 2017)

34.5% 35.1% 36.7% 39.3% 39.8% 40.5% 41.0%

13.1% 12.2% 15.6% 16.5% 18.4% 18.9% 19.9%

0%5%

10%15%20%25%30%35%40%45%

2014 2015 2016 2017 2018E 2019E 2020E

GPM OPMHaitian Jonjee Jia Jia

FinancialASP per ton 5,587 7,239 4,969COGS per ton 2,956 4,348 3,176

Raw material 2,624 3,696 2738Labor 76 327 143Depreciation 175 185 177Manufacturing & other 81 140 118

Selling expense ratio 13.4% 11.8% 8.9%A&P 5.8% 4.0% 3.9%Transport 4.3% 2.1% 1.2%Personnel 2.3% 3.0% 2.5%

Admin cost ratio 4.2% 9.6% 6.1%Personnel 0.8% 4.5% 1.4%R&D 2.8% 3.0% 1.3%Other 0.6% 2.2% 3.3%

OPM 26.2% 15.8% 15.6%

资料来源：Company data, Goldman Sachs Global Investment Research 资料来源：Company data

2018年9月17日 47


图表 98: We expect Jonjee’s growth to come from its condiment business; we forecast its condiment revenues to post aCAGR of 16% in 2017-19ESummary financials

Jonjee (600872.SS)Rmb millionsDivisional P/L FY14 FY15 FY16 FY17 FY18E FY19E FY20E FY21E FY22E FY23E 17-’19E

2yr CAGRRevenuesCondiment 2,391 2,607 2,895 3,453 3,980 4,673 5,391 6,189 7,073 8,089 16.3%Real estate 53 44 130 49 235 50 55 55 55 58 0.5%Others 198 108 134 107 107 107 107 107 107 107 0.0%

2,642 2,759 3,158 3,609 4,322 4,830 5,553 6,351 7,235 8,254 15.7%

Gross ProfitCondiment 829 928 1,077 1,379 1,590 1,919 2,239 2,589 3,006 3,486 18.0%Real estate 10 3 28 6 96 7 7 7 7 8 2.4%Others 72 37 53 32 32 32 32 32 32 32 0.0%

911 967 1,159 1,417 1,718 1,958 2,279 2,629 3,046 3,526 17.5%

BreakdownRevenues (external only)Condiment 91% 95% 92% 96% 92% 97% 97% 97% 98% 98%Real estate 2% 2% 4% 1% 5% 1% 1% 1% 1% 1%Others 7% 4% 4% 3% 2% 2% 2% 2% 1% 1%

100% 100% 100% 100% 100% 100% 100% 100% 100% 100%

YoY Growth (%) FY14 FY15 FY16 FY17 FY18E FY19E FY20E FY21E FY22E FY23ERevenuesCondiment 21% 9% 11% 19% 15% 17% 15% 15% 14% 14%Real estate -76% -18% 196% -62% 375% -79% 10% 0% 0% 5%Others 70% -45% 24% -20% 0% 0% 0% 0% 0% 0%

14% 4% 14.5% 14.3% 19.7% 11.8% 15.0% 14.4% 13.9% 14.1%

Margins FY14 FY15 FY16 FY17 FY18E FY19E FY20E FY21E FY22E FY23E pptGross ProfitCondiment 34.7% 35.6% 37.2% 39.9% 40.0% 41.1% 41.5% 41.8% 42.5% 43.1% 1.1%Real estate 18.9% 6.4% 21.6% 12.5% 40.9% 13.0% 13.0% 13.0% 13.0% 13.0% 0.5%Others 36.5% 34.1% 39.8% 30.2% 30.2% 30.2% 30.2% 30.2% 30.2% 30.2% 0.0%

34.5% 35.1% 36.7% 39.3% 39.8% 40.5% 41.0% 41.4% 42.1% 42.7% 1.3%


2018年9月17日 48


Balance sheet and cash flowAs Jonjee has gradually established its brand in the condiment sector, it has followed

Haitian’s policy of insisting on a cash-for-goods policy with distributors. Its net

receivables amounted to c.11 days in 2017, mainly from its business in real estate and

other areas. In 2014, due to improving operating cash flows, the company reversed its

negative FCF position into a positive one for the first time, and it has grown its cash

returns steadily over the past four years. This has helped support the company’s

stable dividend payout policy at c.32% since 2012.

Jonjee is also investing in the expansion of capacity with construction starting at

end-2017 on another 200K tons of annual capacity for soy sauce and 30K for other

condiment sectors. We expect annual investment in fixed assets to total Rmb200

mn-Rmb400 mn every year in 2018E-2020E.

Jonjee had net debt of Rmb700 mn in 2017, implying a 20% net debt to equity ratio. We

assume long-term debt will remain at roughly Rmb900 mn over the next few years.

图表 99: We expect 240bps OPM margin expansion 2017-19ESummary financials

Consolidated P/L (Rmb mn) FY14 FY15 FY16 FY17 FY18E FY19E FY20E FY21E FY22E FY23E 17-’19E 2yr CAGR

Revenue 2,642 2,759 3,158 3,609 4,322 4,830 5,553 6,351 7,235 8,254 15.7%COGS -1,731 -1,791 -1,999 -2,192 -2,603 -2,872 -3,274 -3,722 -4,189 -4,728 GP 911 967 1,159 1,417 1,718 1,958 2,279 2,629 3,046 3,526 17.5%SG&A (excl. other rev/exp) (565) (631) (666) (823) (924) (1,045) (1,172) (1,324) (1,490) (1,692)

Selling Exp. (231) (270) (275) (426) (449) (550) (635) (739) (853) (981)Admin Exp. (288) (331) (349) (348) (411) (423) (454) (490) (530) (588)

OP 346 336 493 595 794 913 1,107 1,305 1,556 1,834 23.9%Other income/expenses (1) (3) (7) (23) 0 0 0 0 0 0EBIT (reported) 346 333 485 572 794 913 1,107 1,305 1,556 1,834 26.3%D&A (86) (120) (126) (129) (136) (161) (193) (223) (250) (280)EBITDA 432 453 611 701 930 1,074 1,300 1,527 1,806 2,114 23.8%

Net Finance Exp. -33 -61 -63 -60 -56 -54 -54 -50 -46 -40Other Non-Op Income 32 67 64 98 108 107 107 107 107 107Profit Before Tax 344 339 486 609 846 965 1,160 1,362 1,617 1,901 25.9%Tax -51 -65 -76 -98 -136 -155 -187 -219 -260 -306Minority Interest -6 -27 -48 -58 -78 -88 -92 -96 -107 -122NPAT 287 247 362 453 632 722 881 1,047 1,250 1,473 26.2%One-off’s after taxRecurring NPAT 287 247 362 453 632 722 881 1,047 1,250 1,473 26.2%

EPS - Basic (Rmb/Sh) 0.36 0.31 0.45 0.57 0.79 0.91 1.11 1.31 1.57 1.85 EPS - Diluted (Rmb/Sh) 0.36 0.31 0.45 0.57 0.79 0.91 1.11 1.31 1.57 1.85 26.2%

Growth Sales 14% 4% 14.5% 14.3% 19.7% 11.8% 15.0% 14.4% 13.9% 14.1%GP 26% 6% 20% 22% 21% 14% 16% 15% 16% 16%SG&A 26% 12% 6% 24% 12% 13% 12% 13% 13% 14%Operating profit (GP less SG&A) 25% -3% 47% 21% 34% 15% 21% 18% 19% 18%EBIT 25% -4% 46% 18% 39% 15% 21% 18% 19% 18%Reported NPAT 35% -14% 47% 25% 39% 14% 22% 19% 19% 18%Recurring NPAT 35% -14% 47% 25% 39% 14% 22% 19% 19% 18%

MarginsGP margin 34.5% 35.1% 36.7% 39.3% 39.8% 40.5% 41.0% 41.4% 42.1% 42.7% 1.3%Operating profit (GP less SG&A) 13.1% 12.2% 15.6% 16.5% 18.4% 18.9% 19.9% 20.5% 21.5% 22.2% 2.4%EBIT margin 13.1% 12.1% 15.4% 15.8% 18.4% 18.9% 19.9% 20.5% 21.5% 22.2% 3.0%Reported NPAT margin 10.9% 9.0% 11.5% 12.6% 14.6% 15.0% 15.9% 16.5% 17.3% 17.8% 2.4%

SG&A/Sales -21.4% -22.9% -21.1% -22.8% -21.4% -21.6% -21.1% -20.8% -20.6% -20.5% 1.2%Effective Tax Rate -15% -19% -16% -16% -16% -16% -16% -16% -16% -16%


2018年9月17日 49


Key risks1. Uncertainty on the corporate change: There is limited visibility on the company’s

timeline for board member re-election, and some degree of uncertainty remains on the

control of the company or a potential sell-down of shares from major shareholders. On

the positive side, if Jonjee introduces employee stock incentive plans (stock options or

grants), this may help to better align management and shareholder interests, thereby

enhancing Jonjee’s competitiveness in the longer term.

2. Premium positioning and economic slowdown: As 90% of Jonjee’s sales are

generated from mid to premium soy sauce (compared to 70% from the mass to mid-end

for Haitian), Jonjee is likely to be more sensitive to economic cycles, in our view.

3. Faster-than-expected margin improvement: We factor in 130bps GPM expansion and

240bps OPM expansion in 2017-19E; however, increased sales contribution from more

efficient plants (such as the plant in Yangxi, or a faster upgrade at the Zhongshan plant)

may support a faster improvement in margins.

4. Deteriorating industrial environment if expansion plans proceed too quickly: Major

condiment players (including Haitian, Jonjee, and Master) have said they plan to

图表 100: Jonjee has improved its cash return significantlyover the past four yearsReturn on equity and CROCI

图表 101: Over the past four years, Jonjee has improved itsfree cash flows and given back to investors through a stabledividend payout policyFCF and dividend payout

13%

10% 14%

15%

19% 19% 20%

11%

13%

15% 16% 18% 18%

19%

10%

12%

14%

16%

18%

20%

22%

2014 2015 2016 2017 2018E 2019E 2020E

Return on equity (%) CROCI

31% 32% 31% 31.6% 32% 32% 32%

(10%)

-

10%

20%

30%

40%

50%

(100)

-

100

200

300

400

500

600

2014 2015 2016 2017 2018E 2019E 2020E

FCF Dividend payoutRMB mn


图表 102: Jonjee capacity expansion plans

Company Jonjee Lee Kum KeeYear 2017 2020-2021Unit: (K tons) Actual GuidanceSoy sauce 400 2020: +200

Oyster sauce 2021: + 200

Soy derivatives n.a. n.a.

Others 110

2021: Oil: +300Vinegar: +100 Cooking wine: +50

资料来源：Company data, Goldman Sachs Global Investment Research.

2018年9月17日 50


increase their capacity by 50% over the next three years. If these companies expand too

quickly, they may create over-supply in market that would lead to an increase in price

competition.

图表 103: Jonjee summary financials

Profit model (Rmb mn) 12/17 12/18E 12/19E 12/20E Balance sheet (Rmb mn) 12/17 12/18E 12/19E 12/20E

Total revenue 3,609.4 4,321.8 4,830.0 5,552.8 Cash & equivalents 240.8 510.7 660.8 914.5Cost of goods sold (2,191.9) (2,603.3) (2,872.3) (3,274.0) Accounts receivable 113.1 135.4 151.3 174.0SG&A (714.8) (790.9) (898.4) (1,003.4) Inventory 1,413.0 1,606.8 1,694.2 1,841.4R&D (107.8) (133.4) (146.6) (168.6) Other current assets 1,349.3 1,349.3 1,349.3 1,349.3

O Other operating profit/(expense) (22.8) -- -- -- Total current assets 3,116.1 3,602.2 3,855.6 4,279.2EBITDA 700.6 930.4 1,073.6 1,299.9 Net PP&E 1,481.2 1,498.7 1,760.3 2,017.7

D Depreciation & amortization (128.5) (136.2) (160.9) (193.1) Net intangibles 166.6 241.2 317.4 400.3EBIT 572.1 794.2 912.7 1,106.8 Total investments 418.3 499.1 579.1 659.1Interest income 1.6 1.2 2.6 3.3 Other long-term assets 122.6 142.3 164.3 189.6Interest expense (62.1) (57.4) (57.0) (57.0) Total assets 5,304.8 5,983.5 6,676.7 7,546.0

I Income/(loss) from uncons. subs. 1.7 0.8 -- --Others 95.9 106.8 106.8 106.8 Accounts payable 679.5 807.0 890.4 1,015.0Pretax profits 609.2 845.6 965.0 1,159.9 Short-term debt 15.0 -- -- --Income tax (97.8) (136.0) (155.3) (186.7) Other current liabilities 213.8 270.4 298.9 349.3Minorities (58.1) (77.7) (87.5) (91.8) Total current liabilities 908.3 1,077.4 1,189.4 1,364.3

Long-term debt 916.1 916.1 916.1 916.1N Net income pre-preferred dividends 453.3 631.9 722.2 881.4 Other long-term liabilities 30.2 30.2 30.2 30.2

Preferred dividends -- -- -- -- Total long-term liabilities 946.3 946.3 946.3 946.3N Net income (pre-exceptionals) 453.3 631.9 722.2 881.4 Total liabilities 1,854.6 2,023.7 2,135.6 2,310.5

Post-tax exceptionals -- -- -- --Net income 453.3 631.9 722.2 881.4 Preferred shares -- -- -- --

Total common equity 3,140.8 3,572.8 4,066.6 4,669.1EPS (basic, pre-except) (Rmb) 0.57 0.79 0.91 1.11 Minority interest 309.3 387.0 474.5 566.3EPS (basic, post-except) (Rmb) 0.57 0.79 0.91 1.11

E EPS (diluted, post-except) (Rmb) 0.57 0.79 0.91 1.11 Total liabilities & equity 5,304.8 5,983.5 6,676.7 7,546.0DPS (Rmb) 0.18 0.25 0.29 0.35Dividend payout ratio (%) 31.6 31.6 31.6 31.6 BVPS (Rmb) 3.94 4.48 5.10 5.86Free cash flow yield (%) 2.9 2.3 1.9 2.5

Growth & margins (%) 12/17 12/18E 12/19E 12/20E Ratios 12/17 12/18E 12/19E 12/20ESales growth 14.3 19.7 11.8 15.0 CROCI (%) 16.1 18.3 18.2 19.1EBITDA growth 14.6 32.8 15.4 21.1 ROE (%) 15.3 18.8 18.9 20.2EBIT growth 17.9 38.8 14.9 21.3 ROA (%) 8.9 11.2 11.4 12.4Net income growth 25.1 39.4 14.3 22.0 ROACE (%) 14.5 17.8 18.7 20.3EPS growth 25.1 39.4 14.3 22.0 Inventory days 229.4 211.7 209.7 197.1Gross margin 39.3 39.8 40.5 41.0 Receivables days 9.3 10.5 10.8 10.7EBITDA margin 19.4 21.5 22.2 23.4 Payable days 106.7 104.2 107.9 106.2EBIT margin 15.8 18.4 18.9 19.9 Net debt/equity (%) 20.0 10.2 5.6 0.0

Interest cover - EBIT (X) 9.5 14.1 16.8 20.6

Cash flow statement (Rmb mn) 12/17 12/18E 12/19E 12/20E Valuation 12/17 12/18E 12/19E 12/20EN Net income pre-preferred dividends 453.3 631.9 722.2 881.4

D&A add-back 128.5 136.2 160.9 193.1 P/E (analyst) (X) 33.5 34.8 30.4 24.9M Minorities interests add-back 58.1 77.7 87.5 91.8 P/B (X) 4.8 6.1 5.4 4.7N Net (inc)/dec working capital 2.3 (88.7) (19.9) (45.4) EV/EBITDA (X) 23.1 24.5 21.1 17.3

O Other operating cash flow 8.4 (0.8) -- -- EV/GCI (X) 4.0 4.9 4.2 3.6C Cash flow from operations 650.6 756.4 950.7 1,121.0 Dividend yield (%) 0.9 0.9 1.0 1.3

Capital expenditures (206.8) (248.0) (520.7) (558.8)Acquisitions -- -- -- --Divestitures 0.8 -- -- --Others (364.9) (80.0) (80.0) (80.0)

C Cash flow from investments (571.0) (328.0) (600.7) (638.8)

D Dividends paid (common & pref) (111.5) (143.4) (199.9) (228.5)Inc/(dec) in debt (73.7) (15.0) -- --

C Common stock issuance (repurchase) -- -- -- --O Other financing cash flows (95.0) -- -- --

Cash flow from financing (280.3) (158.4) (199.9) (228.5)Total cash flow (200.7) 270.0 150.1 253.7 Note: Last actual year may include reported and estimated data.

Source: Company data, Goldman Sachs Research estimates.


2018年9月17日 51


APPENDICES

2018年9月17日 52


Appendix 1: Condiment industry snapshot

Market overviewChinese consumption of condiments totaled only 12kg per capita in 2017, much lower

than the 21-26kg in the US or other Asian peers. In terms of share of throat, soy sauce

accounts for 60% of consumption among the Chinese, significantly higher than the 25%

in Japan and the 17% in Korea.

In the next five years, we expect soy sauce will remain the most important sub-segment

in the condiment market. At the same time, we expect consumers will increasingly look

for new flavors, which will drive higher volume growth for other sub-segments such as

vinegar, oyster sauce and bouillon.

We also expect the industry will continue to benefit from upgrades to products (richer

tastes and better ingredients), as well as direct price hikes that typically more than offset

cost inflation.

图表 104: We expect soy sauce to remain the most important condiment market, and vinegar, oyster and bouillon to seestronger volume growthChina’s condiment industry: Growth and size by key segment

Bouillon, $1.8bn -> $3.1bn

Soy sauce $14.7bn -> $24.8bn

Pickled products, $0.8bn -> $1.1bn

Oyster sauce, $1.4bn -> $2.7bn

Vinegar $3.7bn -> $6.5bn

0%

2%

4%

6%

0% 1% 2% 3% 4% 5% 6% 7% 8%

2017-23E ASP CAGR

2017-23E Total Volume CAGR

2017 2023E

Bubble is the market size of respective segment (USD bn)

资料来源：Euromonitor, Goldman Sachs Global Investment Research

2018年9月17日 53


图表 105: Compared to US/Asian peers, China is still a less penetrated and a less consolidated marketPeer comparison of overall condiment consumption (as of 2017 unless specified)

China Japan Korea USA

Per capita consumption (kg) 12 26 22 21

Volume (K tonnes) 16,802.2 3,310.5 1,129.5 7,041.8

5.8% -0.7% 0.9% 0.6%

ASP (USD/kg) 2.6 7.5 6.7 6.4

3.2% 0.9% 1.2% 1.5%

CR5 (%)

Segment splitNote: segment with less than 3% of total volume does not show the data

Foodservice as % of total volume (%)

2012-17 CAGR

2012-17 CAGR

Vinegar 21% Bouillon

2% MSG 5% Pickled

Products 1%

Oyster Sauces

4%

Soy Sauces

60%

Chilli Sauces

2%

Others 3% Vinegar

3% Bouillon

3% Dry

Sauces 4%

Pasta Sauces

4% Pickled Products

21%

Mayonnaise 6%

Salad Dressing

s 5%

Soy Sauces

25%

Others 25%

Vinegar 11%

Bouillon 7%

Pasta Sauces

12% Pickled

Products 14%

Ketchup 9%

Mayonnaise 9%

Salad Dressing

s 7%

Soy Sauces

3%

Others 27%

Vinegar 12%

Bouillon 4%

MSG 3%

Pickled Products

27%

Ketchup 3%

Mayonnaise 3%

Soy Sauces

17%

Chilli Sauces

10%

Others 18%

12 26 22 21

21 32

80

25

55 38

81

28

Note: Euromonitor foodservice volume data is based on consumer perspective; food processing is not provided separately.

资料来源：Euromonitor, China Condiment Association, Statistics Japan, Goldman Sachs Global Investment Research

2018年9月17⽇ 54


图表 106: China condiment value chain (as of 2017 unless specified)

(1) Liquid state method (20%) (1) Grain based (80%)Soybean Wheat Other Sorghum / Rice Other

70% 20% 10% 95% 5%(2) Solid state method (80%) (2) Sugar based (15%)

Soybean Meal Bran Other Fruit Honey / Sugar Other70% 20% 10% 70% 20% 10%

(3) Alcohol based (5%)Alcohol Other

95% 5%

Ups

trea

m

Bouillon(US$ 1.8bn)

No.1 Nestle

55

Note: 1) Raw material also includes water for all types of sauces.2) Formulated vinegar composes of natural ferminated vinegar (at least 50%) and edible acetic acid.

Foodservice(50%)

Other(1%)

Traditional Trade(28%)

Modern Trade(71%)

Cha

nnel

Ret

ail

Oyster sauce(US$ 1.4bn)

No.1Lee Kum Kee

25

Pickled products

(US$ 0.8bn)

No.1 Fuling Zhacai

30

Food Processing(10%)

Home Dining(40%)

Con

dim

ent

Vinegar (US$ 4bn, volume share, 2016)Soy Sauce (US$ 15bn, volume share, 2017)

Haitian, 16 Meiweixia

n, 4 Lee Kum Kee, 3 Other, 77

Heng Shun, 9 Shui Ta, 8

Zi Lin, 3

Other, 79

资料来源：Euromonitor, China Condiment Association, Goldman Sachs Global Investment Research

2018年9月17⽇ 55


Differences in soy sauceSoy sauce is usually broken down into two main types: chemically produced vs. naturally

brewed. Generally, we estimate that 50% of soy sauce consumed in China is naturally

brewed. About half of the naturally brewed soy sauce is made using the liquid-state

method. In Exhibits 107-108, we summarize a number of key difference between these

methods in terms of ingredients, fermentation, length of process, color, taste and smell.

Chemically produced soy sauce: Hydrochloric acid is added, it does not undergo any

form of fermentation, and it is generally manufactured within several weeks.

There are two main ways to ferment naturally brewed soy sauce:

Liquid-state: Natural brewed soy sauce requires a fermentation process for soybeann

and wheat that lasts 3-6 months.

Solid-state: Requires only 15-45 days of fermentation for bran and soybean.n

At higher costs, the liquid-state method produces a higher content of amino acids, which

translates into stronger umami and better taste.

图表 107: China still consumes solid-state soy sauce andchemically produced soy sauce, whereas Japan is mostlynaturally brewed soy sauceChina soy sauce vs. Japan soy sauce

图表 108: Comparison of naturally brewed soy sauce vs.chemically produced soy sauce

China Japan

Liquid-state as % of naturally brewed

IngredientsMostly soybean meal, bran

Mostly soybean meal, roasted wheat

Addictives allowed

MSG, caramel coloring etc. No

Length of process

Solid-state: 15-45 daysLiquid-state: 3-6 months Liquid-state: 6 months

Taste Salty and umami More balanced, umami, sweet and salty

Nat

ural

ly b

rew

ed

% of naturally brewed 50 85

50 95

Natural brewedLiquid-state Chemically produced

Ingredients Soybean (meal), wheat (flour/bran), salt Hydrochloric acid

Fermentation Yes No

Length of process Several months Several weeks

Color Clear reddish-brown Cloudy, dark

Taste Balanced flavor, umima, sweet, salty Unpleasant and strong

Smell Slightly sweet Strong, sour, chemical

资料来源：Goldman Sachs Global Investment Research 资料来源：Goldman Sachs Global Investment Research

2018年9月17日 56


Appendix 2: China condiments in history

Over time, the Chinese have delineated seven major flavors by trying various ingredients and experimenting with different

cooking methods. These tastes are salty, sour, sweet, bitter, spicy, umami and astringent. While upper and middle class

consumers, with their strong purchasing power, have paid a lot of attention to the diversity and harmony of multiple flavors,

mass-market consumers are limited to satisfying their basic needs, and they rely heavily on pickled products and soybean

sauce.

Note: Prices in this report are as of the September 14, 2018 market close unless indicated otherwise.

图表 109: Historically, upper and middle class consumers have emphasized the diversity and harmony of multiple flavors (seven in total), whereas mass-market consumersseek to satisfy basic needs and rely heavily on pickled products and soybean sauceThe historical development of China’s condiment market

Salt Bouillon (c.1100BC)

Sauce (c.770BC~220BC)Light soy sauce (c.200BC~200AD)

Fermented soya bean(c. 400BC)Seasoned soy sauce (c. 600AD)

Soy sauce (c. 900AD) Pickled vegetables

Examples Ingredient Ingredient Ingredient Ingredient Ingredient

Examples Examples Examples Examples Examples

Plum or other sour fruit(c. 3000 years ago) Pickled vegetables

Examples Ingredient Ingredient Ingredient

Examples

Sweet Honey (c. 1046BC) Date, chestnut (c. 1046BC)

Cane juice and purified product (200BC) Licorice

Bitter Tea leaves Alcohol Animal bile (c. 200BC)

Spicy Pepper (c. 200BC) Ginger, onion, garlic(700BC~11BC)

Chili, imported through silk road

Umami

Astringent

Dehydrated meatSaltAlcohol

SoybeanSea saltLake saltWell salt

Fermented flour sauceBeef pastePrahoc

Plum Rice GrainHawthorn Vinegar AlcoholGrape Vegetables

VegetablesSalt

Sichuan ZhacaiSeasoned soy sauceSoy sauce

FlourSalt

Rice vinegarGrain vinegar

Salty

Sour

Pepper/Chili/Alcohol/etc.

Kimchee

GrainOther

Second most important flavor next to salty, with preservative effect

Vinegar (25AD~220AD)Sour sauce and sour food(770BC~11BC)

Soybean/Black soya bean

Soy sauce

SugarSalt

Most important flavor, taste focus changes from salt consumption to freshness enhancement over time

Persimmon, tea (green tea)

SugarSaltSoybean/Black soya bean

Soy sauce

Syrup made from rice and malt (c. 3000 years ago)

Taste from fish, shellfish, soy sauce (c. 1600AD)

资料来源：Zhao, R. (2014). The history of Chinese food culture. Shanghai: Shanghai People’s Publishing House.

2018年9月17⽇ 57


Additional DisclosureThird party brands used in this report are the property of their respective owners, and are used here for informational

purposes only. The use of such brands should not be viewed as an endorsement, affiliation or sponsorship by or for

Goldman Sachs or any of its products/services.

高华证券感谢高盛分析师孔令侃，CFA和李⾬晴在本报告中的贡献。

2018年9月17⽇ 58


信息披露附录

申明

本人，廖绪发, CFA，在此申明，本报告所表述的所有观点准确反映了本人对上述公司或其证券的个人看法。此外，本人薪金的任何部分不曾与，不与，也将不会与本报告中的具体推荐意见或观点直接或间接相关。

投资摘要投资摘要部分通过将一只股票的主要指标与其行业和市场相比较来评价该股的投资环境。所描述的四个主要指标包括增长、回报、估值倍数和波动性。增长、回报和估值倍数都是运用数种方法综合计算而成，以确定该股在地区研究行业内所处的百分位排名。

每项指标的准确计算方式可能随着财务年度、行业和所属地区的不同而有所变化，但标准方法如下：

增长是下一年预测与当前年度预测的综合比较，如每股盈利、EBITDA 和收入等。回报是各项资本回报指标一年预测的加总，如CROCI、平均运用资本回报率和净资产回报率。估值倍数根据一年预期估值比率综合计算，如市盈率、股息收益率、EV/FCF、EV/EBITDA、EV/DACF、市净率。波动性根据12个月的历史波动性计算并经股息调整。

并购评分在我们的全球覆盖范围中，我们使用并购框架来分析股票，综合考虑定性和定量因素（各行业和地区可能会有所不同）以计入某些公司被收购的可能性。然后我们按照从1到3对公司进行并购评分，其中1分代表公司成为并购标的的概率较高(30%-50%)，2分代表概率为中等(15%-30%)，3分代表概率较低(0%-15%)。对于评分为1或2的公司，我们按照研究部统一标准将并购因素体现在我们的目标价格当中。并购评分为3被认为意义不大，因此不予体现在我们的目标价格当中，分析师在研究报告中可以予以讨论或不予讨论。

QuantumQuantum是提供具体财务报表数据历史、预测和比率的高盛专有数据库，它可以用于对单一公司的深入分析，或在不同行业和市场的公司之间进行比较。

GS SUSTAINGS SUSTAIN是一项侧重于通过发现优质行业领先企业而实现长期超额收益的全球投资策略。GS SUSTAIN 50关注名单列出了我们认为凭借出色的资本回报、具有可持续性的竞争优势和对ESG（环境、社会和企业治理）风险的有效管理而有望在长期内相对于全球同业表现出色的行业领军企业。候选企业主要基于对企业在这三方面表现的综合量化分析筛选而出。

相关的股票研究范围廖绪发, CFA：A股传媒、A股食品饮料。

A股食品饮料：Anhui Gujing Distillery Co.、Jiangsu King’s Luck Brewery、Jiangsu Yanghe、Kweichow Moutai、Luzhou Laojiao、Qinghai HuzhuBarley Wine Co.、Shanxi Xinghuacun Fen Wine、Sichuan Swellfun Co.、Tsingtao Brewery (A)、Wuliangye Yibin。

A股传媒：Alpha Group、Beijing Enlight Media Co.、Beijing Gehua CATV、Beijing Hualubaina Film & TV Co.、BlueFocus Communication、ChinaSouth Publishing & Media、Focus Media Information Tech、Guangdong Advertising、Huayi Brothers Media、IMAX China Holding、JiangsuPhoenix、Oriental Pearl、Ourpalm Co.、Wanda Film、Zhejiang Huace Film & TV。

信息披露与公司有关的法定披露以下信息披露了高盛高华证券有限责任公司（“高盛高华”）与北京高华证券有限责任公司（“高华证券”）投资研究部所研究的并在本研究报告中提及的公司之间的关系。

没有对下述公司的具体信息披露： Foshan Haitian Flavouring & Food (Rmb70.05)、Jonjee Hi-Tech Industrial Co. (Rmb28.99)

公司评级、研究行业及评级和相关定义买入、中性、卖出：分析师建议将评为买入或卖出的股票纳入地区投资名单。一只股票在投资名单中评为买入或卖出由其相对于所属研究行业的总体潜在回报决定。任何未获得买入或卖出评级且拥有活跃评级（即不属于暂停评级、暂无评级、暂停研究或没有研究的股票）的股票均被视为中性评级。每个地区投资评估委员会根据25-35%的股票评级为买入、10-15%的股票评级为卖出的全球指导原则来管理该地区的投资名单；但是，在某一特定分析师所覆盖行业中买入和卖出评级的分布可能根据地区投资评估委员会的决定而有所不同。此外，每个地区投资评估委员会管理着地区强力买入或卖出名单，该名单以总体潜在回报规模和/或实现回报的可能性为主要依据确立各自研究范围内的投资建议。将股票加入或移出此类强力买入或卖出名单并不意味着分析师对这些股票的投资评级发生了改变。

总体潜在回报：代表当前股价低于或高于一定时间范围内预测目标价格的幅度，包括所有已付或预期股息。分析师被要求对研究范围内的所有股票给出目标价格。总体潜在回报、目标价格及相关时间范围在每份加入投资名单或重申维持在投资名单的研究报告中都有注明。

研究行业及评级：每个行业研究的所有股票名单可登陆http://www.gs.com/research/hedge.html通过主要分析师、股票和行业进行查询。分析师给出下列评级中的其中一项代表其根据行业历史基本面及／或估值对研究对象的投资前景的看法。具吸引力(A)：未来12个月内投资前景优于研究范围的历史基本面及／或估值。中性(N)：未来12个月内投资前景相对研究范围的历史基本面及／或估值持平。谨慎(C)：未来12个月内投资前景劣于研究范围的历史基本面及／或估值。

暂无评级(NR)：在高盛于涉及该公司的一项合并交易或战略性交易中担任咨询顾问时并在某些其他情况下，投资评级和目标价格已经根据高盛的政策予以除去。暂停评级(RS)：由于缺乏足够的基础去确定投资评级或价格目标，或在发表报告方面存在法律、监管或政策的限制，我们已经暂停对这种股票给予投资评级和价格目标。此前对这种股票作出的投资评级和价格目标(如有的话)将不再有效，因此投资者不应依赖该等资料。暂停研究(CS)：我们已经暂停对该公司的研究。没有研究(NC)：我们没有对该公司进行研究。不存在或不适用(NA)：此资料不存在或不适用。无意义(NM)：此资料无意义，因此不包括在报告内。

一般披露本报告在中国由高华证券分发。高华证券具备证券投资咨询业务资格。

本研究报告仅供我们的客户使用。除了与高盛相关的披露，本研究报告是基于我们认为可靠的目前已公开的信息，但我们不保证该信息的准确性和完整性，客户也不应该依赖该信息是准确和完整的。报告中的信息、观点、估算和预测均截至报告的发表日，且可能在不事先通知的情况下进行调整。我们会

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适时地更新我们的研究，但各种规定可能会阻止我们这样做。除了一些定期出版的行业报告之外，绝大多数报告是在分析师认为适当的时候不定期地出版。

高盛高华为高华证券的关联机构，从事投资银行业务。高华证券、高盛高华及它们的关联机构与本报告中涉及的大部分公司保持着投资银行业务和其它业务关系。

我们的销售人员、交易员和其它专业人员可能会向我们的客户及自营交易部提供与本研究报告中的观点截然相反的口头或书面市场评论或交易策略。我们的资产管理部门、自营交易部和投资业务部可能会做出与本报告的建议或表达的意见不一致的投资决策。

本报告中署名的分析师可能已经与包括高华证券销售人员和交易员在内的我们的客户讨论，或在本报告中讨论交易策略，其中提及可能会对本报告讨论的证券市场价格产生短期影响的推动因素或事件，该影响在方向上可能与分析师发布的股票目标价格相反。任何此类交易策略都区别于且不影响分析师对于该股的基本评级，此类评级反映了某只股票相对于报告中描述的研究范围内股票的回报潜力。

高华证券及其关联机构、高级职员、董事和雇员，不包括股票分析师和信贷分析师，将不时地根据适用的法律和法规对本研究报告所涉及的证券或衍生工具持有多头或空头头寸，担任上述证券或衍生工具的交易对手，或买卖上述证券或衍生工具。

在高盛组织的会议上的第三方演讲嘉宾（包括高华证券或高盛其它部门人员）的观点不一定反映全球投资研究部的观点，也并非高华证券或高盛的正式观点。

在任何要约出售股票或征求购买股票要约的行为为非法的地区，本报告不构成该等出售要约或征求购买要约。本报告不构成个人投资建议，也没有考虑到个别客户特殊的投资目标、财务状况或需求。客户应考虑本报告中的任何意见或建议是否符合其特定状况，以及(若有必要)寻求专家的意见，包括税务意见。本报告中提及的投资价格和价值以及这些投资带来的收入可能会波动。过去的表现并不代表未来的表现，未来的回报也无法保证，投资者可能会损失本金。

某些交易，包括牵涉期货、期权和其它衍生工具的交易，有很大的风险，因此并不适合所有投资者。外汇汇率波动有可能对某些投资的价值或价格或来自这一投资的收入产生不良影响。

投资者可以向高华销售代表取得或通过http://www.theocc.com/about/publications/character-risks.jsp取得当前的期权披露文件。对于包含多重期权买卖的期权策略结构产品，例如，期权差价结构产品，其交易成本可能较高。与交易相关的文件将根据要求提供。

全球投资研究部提供的不同服务层级：根据您对接收沟通信息的频率和方式的个人偏好、您的风险承受能力、投资重心和视角（例如整体市场、具体行业、长线、短线）、您与高华证券的整体客户关系的规模和范围、以及法律法规限制等各种因素，高华证券全球投资研究部向您提供的服务层级和类型可能与高华证券提供给内部和其他外部客户的服务层级和类型有所不同。例如，某些客户可能要求在关于某个证券的研究报告发表之时收到通知，某些客户可能要求我们将内部客户网上提供的分析师基本面分析背后的某些具体数据通过数据流或其它途径以电子方式发送给他们。分析师基本面研究观点（如股票评级、目标价格或盈利预测大幅调整）的改变，在被纳入研究报告、并通过电子形式发表在内部客户网上或通过其它必要方式向有权接收此类研究报告的所有客户大范围发布之前，不得向任何客户透露。

所有研究报告均以电子出版物的形式刊登在高华客户网上并向所有客户同步提供。高华未授权任何第三方整合者转发其研究报告。有关一个或多个证券、市场或资产类别（包括相关服务）的研究报告、模型或其它数据，请联络您的高华销售代表。

北京高华证券有限责任公司版权所有 © 2018年

未经北京高华证券有限责任公司事先书面同意，本材料的任何部分均不得(i)以任何方式制作任何形式的拷贝、复印件或复制品，或(ii)再次分发。

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