\u3000\u3000 Angel Yeast Co.Ltd(600298) (600298)
Conclusions and suggestions:
Event summary:
At the end of January, the company issued several project announcements, which will be completed and put into operation respectively from 2022 to 2024. The total construction capacity includes 300000 tons of hydrolyzed sugar deep processing, 20000 tons of yeast products (including 5000 tons of extract and 15000 tons of dry yeast) expansion of Egyptian factory, 8000 tons of yeast products expansion of Russian factory, and intelligent transformation of 10000 tons of yeast sub packaging line. The total amount of the project is about 920 million, The internal rate of return (IRR) is between 7% and 20%.
From this round of announcement, the company has a new round of production expansion at its factories outside China. From the perspective of foreign factories, since the Egyptian and Russian factories were put into operation, their production conditions have been good and their production capacity has reached saturation (the yeast and extract production line of the Egyptian company was fully produced in 2021, and the potential gap is estimated to be more than 25000 tons; the capacity utilization rate of the Russian factory reached 115% in 2020). In order to cooperate with the overseas market development, the expansion of overseas factories conforms to the development strategy of the company. On the other hand, in 2021, the price of molasses increased significantly, and the gross profit margin in the first three quarters was obviously under pressure (the gross profit margin of 1-3q was 33.2%, 30.4% and 24.6% respectively). Relying on the deep processing technology of hydrolyzed sugar, the company is expected to partially replace the demand for molasses (it is expected to replace about 30% of China’s molasses demand in the long run) and reduce production costs, so as to improve its anti risk ability and profitability.
We sort out the announcements over the years. Since 2019, driven by environmental protection requirements and tight supply, the company has gradually entered a new round of capacity expansion cycle. Through technological transformation and production expansion, the company has 11 yeast production bases in the world in 2020, with a total global production capacity of 270000 tons, including 184000 tons of yeast and 86000 tons of extract. In the past two years, under the condition of actively expanding the overseas market and steady expansion of the Chinese market, the pace of the company’s capacity expansion has accelerated. In 2021 alone, eight technological transformation / projects have been put into construction, covering yeast products and other food raw materials. From the perspective of construction cycle, they will be put into operation in 2022, which will continue to add power to the company’s subsequent operation.
In the short term, the price of molasses will fall in 2022, but from the perspective of procurement, it is expected that the procurement price will be higher than last year. Based on the cost pressure, the company has raised the price of products outside China since the third quarter of last year, and the price increase range of all products is more than 10%. It is expected that the operating pressure caused by the cost from 21q4 will be alleviated. In the medium and long term, the company’s overseas strategy is advancing steadily. In addition to the expansion of overseas factories, the company plans to set up a new Mexican subsidiary to facilitate the development of Latin American business. It is expected to further improve its international competitiveness in the future.
To sum up, it is estimated that the net profits from 2021 to 2023 will be 1.34 billion, 1.59 billion and 1.96 billion respectively, with year-on-year increases of – 2.2%, 18.3% and 23.3% respectively. The EPS are 1.61 yuan, 1.91 yuan and 2.35 yuan respectively. The current share price corresponding to PE is 36 times, 30 times and 25 times respectively. At present, the valuation is reasonable and the “buy” investment proposal is maintained.
Risk tip: the overseas expansion is less than expected, the cost rise is more than expected, and the terminal mobile sales is less than expected
