Zhe Jiang Li Zi Yuan Food Co.Ltd(605337) (605337)
Core view
It has grown steadily for more than 20 years and Zhe Jiang Li Zi Yuan Food Co.Ltd(605337) the future can be expected. Zhe Jiang Li Zi Yuan Food Co.Ltd(605337) was established in 1994, focusing on the production and sales of milk containing drinks. The classic single product sweet milk is unique, which promotes the steady growth of the company. The ownership structure of the company is centralized, and the actual controller holds 60%; Core operators and technical backbones participate in shareholding and are deeply bound with the interests of the company. In terms of product layout, the company takes sweet milk as the core and gradually expands lactic acid bacteria drinks; Sweet milk maintained steady growth, contributing 96% of revenue and 98% of gross profit in 2020.
The category of sweet milk increased steadily and Zhe Jiang Li Zi Yuan Food Co.Ltd(605337) expanded the subdivided channels. Sweet milk is an important category of milk drinks, Zhe Jiang Li Zi Yuan Food Co.Ltd(605337) is close to Wangzai milk in taste; Under the background of the steady growth of the market scale of liquid dairy products, the acidic dairy beverage products shrank, but the main sweet milk products still maintained steady growth. The competition pattern of milk beverage is stable, and the competitiveness of the company's sweet milk products is strong. Zhe Jiang Li Zi Yuan Food Co.Ltd(605337) the mainstream consumers of sweet milk products are young people aged 10-30 and campus students; Breakfast shops and schools are Zhe Jiang Li Zi Yuan Food Co.Ltd(605337) important sales channels. With the development of chain breakfast stores, the growth of breakfast out of market accelerates Zhe Jiang Li Zi Yuan Food Co.Ltd(605337) penetration among consumers; Convenience stores and campus channels are also important revenue growth points of the company.
Production capacity launch promotes regional expansion, and marketing is strengthened to enhance brand strength. Based in East China, the company focuses on expanding regional markets in central and southwest China; In recent years, East China has maintained steady growth, with a growth rate of about 20%; Central China and southwest China have a high growth rate of about 40%. The company will build 100000 tons and 70000 tons of milk beverage production capacity in Henan and Yunnan respectively, which is expected to accelerate the growth of the two places; In the medium and long term to 25 years, the company's production capacity is expected to reach 500000 tons, which will support the revenue scale of more than 3 billion yuan. The company's product channels are highly profitable, far higher than competitive products, and promote the steady growth of the number of dealers. On the margin, in order to achieve regional expansion, the company increased marketing investment and improved brand awareness by advertising on China Central Television and high-speed rail.
Gross profit margin has room for improvement and is optimistic about long-term profit improvement. The gross profit margin of 2021h1 company is 37%; The main cost items include milk powder and raw milk, HDPE, carton, etc; Benefiting from the decrease in the proportion of outsourced processing and the scale effect, the gross profit margin has room to improve. In the short term, the increase of marketing investment is expected to affect the net interest rate; In the medium and long term, with the dilution effect of capacity release and expansion of marketing scale, there is still room for improvement of net interest rate.
Financial forecast and investment suggestions: it is predicted that the company's EPS will be 1.25, 1.64 and 2.04 yuan from 21 to 23 respectively, and the listed companies of dairy products and dairy drinks are selected as comparable companies. The comparable company's 22-year PE valuation is 28 times, with a 10% valuation premium, corresponding to 31 times of PE, with a target price of 50.84 yuan, and a buy rating for the first coverage.
Risk tips: the risk of regional expansion is less than expected, the risk of sharp rise in raw material costs, the risk of single category, the risk of excessive investment in marketing expenses, the risk of production capacity is less than expected, and the risk of food safety events.
