\u3000\u3000 Angel Yeast Co.Ltd(600298) (600298)
Key investment points:
Event: in January 2022, the company announced the decision to expand production in Egypt. The company has made a lot of recent announcements on production expansion, and we have sorted them out accordingly, mainly focusing on the production expansion arrangement of the company from 2022 to 2025.
The contradiction faced by the company is the contradiction between the large market demand at home and abroad and the insufficient production capacity and supply of the company. During the 14th Five Year Plan period, the development of various fields and businesses of the company requires the production capacity of yeast products to exceed 500000 tons. In 2020, the company’s yeast production capacity will reach 270000 tons, including 184000 tons of yeast and 86000 tons of yeast extract. It is estimated that by 2025, the company’s total yeast production capacity will reach 330000 to 340000 tons; If considering the further construction of overseas plants, it is estimated that the company’s total yeast production capacity will reach 360000 tons at most in 2025. Therefore, the contradiction between market demand at home and abroad and the company’s capacity bottleneck is still the main contradiction in the current development stage.
From 2022 to 2025, the company is still in a certain period of expansion and rise, and its performance is expected to maintain strong growth. During this period, factories in Yunnan, Dehong, Yichang, Egypt and Russia all have production expansion plans, and the new capacity will be put into operation around 2022, 2023 and 2025. In terms of yeast capacity expansion, the company will build a yeast capacity of 41500 tons in Yichang Industrial Park of the headquarters; A new capacity of 25000 tons will be built in Lancang County, Pu’er, Yunnan Province, of which 15000 tons of active dry yeast in the first phase will be put into operation in June 2022; A new 15000 ton Ye production capacity will be built in Angel Dehong, of which 10000 tons in the first phase will be put into operation in December 2022. Based on the existing 23000 tons of yeast production capacity in Russia, the company will build another 8000 tons of production capacity, which is expected to be put into operation by the end of 2023. Based on the existing 35000 tons of yeast capacity in Egypt, the company will build a new 20000 tons of yeast capacity, including 15000 tons of active dry yeast and 5000 tons of yeast extract. It is expected to be put into operation in 2025. The accounting net profit margin of the above projects is generally high. The net profit margin of Yunnan capacity is expected to reach 19.32%, that of Russia capacity is expected to reach 20%, that of Egypt capacity is expected to reach 16%, and the profitability of new projects is generally higher than that of traditional production bases. The reasons for the good profit prospects of new projects include: the overseas capacity has experienced many years of running in, and the capacity utilization rate has reached a high level. For example, the capacity utilization rate in Russia has reached 110%; In addition, China’s new production capacity makes use of Yunnan’s local resource advantages and reduces the cost of raw materials; Finally, the development of Chinese factories to high-end yeast has also improved the overall profitability of yeast. After completion, the production capacity of angel Egypt will increase to 55000 tons, including 38000 tons of active dry yeast and 17000 tons of yeast extract; Angel Russia’s production capacity will increase to 31000 tons, mainly active dry yeast. In the medium term, the foreseeable overseas production capacity will reach 86000 tons, China’s production capacity will reach 270000 tons, and the total will reach 360000 tons by 2025.
The company has built its own production capacity of hydrolyzed sugar, which partially replaces molasses, the core raw material of yeast. The problem of high raw material supply and raw material cost will be alleviated in the second half of this year. The company will build 150000 tons of 30% concentration hydrolyzed sugar production lines in Angel Chongzuo, angel Liuzhou and angel Yichang respectively, and the production time will be June 2022. The technical process of the hydrolyzed sugar project is relatively mature: the hydrolyzed sugar takes broken rice as the raw material, the raw material is easy to obtain and the cost is low. The hydrolyzed sugar extracted from broken rice can replace molasses and become the main raw material for yeast production, so as to help yeast production realize the diversification of raw materials and reduce the serious dependence of production on molasses raw materials. After the company’s main raw materials are partially self-sufficient, it is conducive to reducing the price of molasses nationwide, and the high cost of molasses in the past two years is expected to fall to a historically reasonable level. At present, the company needs 1.3 to 1.4 million tons of molasses annually, and the output of molasses has high requirements for the place of origin, which is mainly concentrated in Guangxi and Yunnan, with limited supply. The company’s increasing demand for molasses has raised the price of molasses in China, so it is urgent to solve the problem of molasses substitution. In the middle of 2022, 450000 tons of hydrolyzed sugar will be used as raw materials, accounting for 32% of the company’s annual molasses demand. The self-sufficiency of raw materials can reduce the cost pressure, and the company’s yeast gross profit margin is expected to increase quarter by quarter. In addition, angel Chifeng will build 40000 tons of molasses storage tank equipment, with a total storage capacity of 120000 tons, and the reserve rate will rise from 50% to 80%. Increase the molasses reserve, so that the company can increase the purchase volume at a lower price in the peak molasses production season and stabilize the annual cost.
The company has long-term plans in North America, South America, Europe and Asia Pacific, and has plans to build factories in North America, South America and Europe in addition to setting up offices. The US market has great potential, with an annual demand of 115000 tons of yeast. The company has completed the initial development in the American market, and the revenue of each business segment has reached the scale of tens of millions, which has a certain market foundation. As the top three yeast manufacturers in the world, it is absolutely necessary for the company to regard the US market as the target market in the future. The company has set up branches in the United States. First, strive to localize marketing services and expand customer coverage; Second, through OEM (commissioned production) and ODM (commissioned design) and other forms of processing and production, accumulate industrial resources and make reserves for the construction of factories; The third is to transform export trade into local operation through overseas direct investment, so as to overcome trade barriers and establish a positive image of “multinational corporations” in the world. In the Latin American market, the company also has a certain foundation. At present, it has developed about 140 dealer customers. The Latin American headquarters of the company is located in Mexico, which is one of the regions with the richest molasses resources in the world and the region where the global yeast industry is concentrated, which has the effect of cluster economy. The annual demand for yeast and yeast derivatives in the European market is 150000 tons. The current supply of the company accounts for 13.5% of the demand in the European market. The company plans to build a factory and rely on local marketing to change export to operation, so as to further expand the share of the European market. The company has set up a branch in Singapore to integrate the whole Asia Pacific business by taking Singapore as the sales platform of the Asia Pacific market. The company has more than 400 customers in the Asia Pacific market, covering east Asia, South Asia, Southeast Asia and Oceania. It is the second largest overseas market of the company. Singapore has geographical advantages, and its trade, shipping, finance, infrastructure and other industries are relatively developed; In addition, Singapore has a good business environment, which can save the operating costs of enterprises and avoid all kinds of unforeseen risks in the future.
The company actively develops new fermentation categories to find the next commercial field for long-term development. At present, the company’s new products include compound microorganisms, enzyme preparations, plant protease hydrolysates and β- Nicotinamide mononucleotide.
By combing the company’s production expansion plan, we raised the company’s revenue growth in the next three years accordingly. At the same time, considering that the price of molasses has fallen from a high level and the substitution of hydrolyzed sugar for molasses, we have reduced the main operating costs of the company in the next three years. Among them, the new capacity implemented in 2022 (mainly in the second half of the year) includes 32000 tons of yeast capacity in Angel Xinjiang (kekekedala), 15000 tons of yeast capacity in Angel Yunnan phase I, and 11000 tons of high nucleic acid capacity in Angel Binzhou; The new capacity implemented in the performance in 2023 is mainly the 10000 ton Ye capacity of angel Dehong; The new capacity reflected in the performance in 2024 includes: Angel Russia’s new 8000 tons of yeast capacity; Egypt’s new production capacity of 20000 tons of yeast will thicken its performance after 2025.
Investment suggestion: we predict that the EPS of the company in 2021, 2022 and 2023 will reach 1.67, 2.08 and 2.52 yuan respectively. Referring to the closing price on February 7, the corresponding PE will be 35, 28 and 23 times respectively. The company’s performance growth in the next three years is relatively clear and the valuation is reasonable. However, in view of the current market environment, we give the company an “overweight” rating.
Risk tip: Egypt’s energy costs have risen sharply; China’s environmental protection, energy, molasses and other costs continue to rise; The company’s capacity expansion progress is less than expected; And the performance fluctuation caused by the sharp fluctuation of exchange rate.
