Inner Mongolia Yili Industrial Group Co.Ltd(600887) (600887)
Performance review
On December 9, the company announced that the fixed increase was successfully implemented. The issue price was 37.89 yuan / share (discount rate 5.46%), the number of shares issued was 318 million shares (increase of 5%), and a total of 12.047 billion yuan was raised. There were 22 issuing objects, mostly foreign capital, of which Barclays was allocated 1.488 billion yuan, Goldman Sachs was allocated 1.414 billion yuan, and the rest were allocated less than 1 billion yuan.
Business analysis
Fixed growth will be implemented to consolidate the leading edge in multiple directions. According to the fixed increase scheme, Most of the funds raised were used for the production capacity construction of liquid milk (RMB 5.023 billion, accounting for 41.69%), followed by the intelligent manufacturing project of infant powder (RMB 1.55 billion, accounting for 12.87%) and digital construction (1.1 billion yuan, accounting for 9.13%). The purpose of raising funds this time is to further consolidate the production capacity foundation and improve operation efficiency. Moreover, in terms of production capacity investment, the company focuses more on high-end liquid milk and infant powder with higher profitability.
We are optimistic about the long logic of the company’s net interest rate increase. 1) From the perspective of strategic demands, the two giants have gradually taken into account profits in the past 21 years, and the vicious price war has proved to be of no benefit to both sides. We believe that the means to increase the share in the future will be more diversified and comprehensive. The share competition is not only the competition of cost investment, but also the competition of channel foundation, milk source guarantee, R & D strength and operation efficiency. 2) From the specific implementation path, in addition to appropriate cost control and promotion, category upgrading and efficiency improvement can also provide space. The proportion of Jindian Series in white milk continues to increase, and the proportion of Jindian middle and high-end categories (organic and dream cover) has reached 30% +; milk powder with higher gross profit and net profit is also making significant efforts; in addition, the company has always attached importance to digital, information construction and distribution channel optimization, which can bring optimization space for net profit improvement.
Investment advice
The diluted earnings per share of the fixed increase is about 5%. We expect the growth rate of the company’s net profit attributable to the parent company in 21-23 years to be 28% / 18% / 17% respectively. After the fixed increase, the corresponding EPS is 1.42/1.68/1.96 yuan and the corresponding PE is 29 / 25 / 21 times respectively, maintaining the “buy” rating.
Risk statement
Raw milk prices rose more than expected, food safety problems, and industry competition intensified
