Ligao Foods Co.Ltd(300973) (300973)
Ligao Foods Co.Ltd(300973) : a leader in frozen baked goods, with clear performance objectives
Founded in 2000, the company started with vegetable fat cream and acquired aokun in 2014 to expand its products to the field of frozen baking, forming a large baking pattern. Its main products include butter, fruit products, sauces, chocolate and other baked food raw materials, frozen baked semi-finished products and finished products, of which the revenue of frozen baked food accounts for about 60%.
The ownership structure of the company is relatively centralized, and the shareholding ratio of senior executives and employees reaches 49.99%. In 2021, the company granted a total of 8.5 million stock options to 9 senior executives and core managers, accounting for about 5% of the total share capital, and the exercise price is 108.20 yuan / share. If the incentive personnel exercise the rights, the five-year CAGR of operating income needs to reach at least 23.9%.
Frozen and baked food industry: increased penetration opens up market space. Frozen baked food combines the advantages of prepackaged products and freshly baked products, and solves a series of problems such as cost, quality, taste and safety faced by bakeries operating in the traditional front store and back factory mode. The proportion of frozen dough in the bread industry in Europe is about 40%, that in the United States is about 70%, and that in China may be less than 10%. With consumers paying more attention to the taste and quality of baked goods, and the rising rent and labor costs, there is still room for improvement in the frozen baked food market in the future. We believe that by 2025, the market scale of frozen baked goods will be about 22.94 billion yuan, and the CAGR in five years will be 20.6%.
Core advantages: the technical level is leading in the industry, and the channel structure is constantly optimized
The company has strong automatic production capacity and technical ability to produce diversified products. There are many kinds of baked food raw materials and frozen baked food products, and the formula and production process of some products are difficult. The company has established a perfect technical innovation system and high-quality R & D team. The technical capabilities of product formula, production process and production equipment have been continuously strengthened and innovated, breaking through the technical difficulties of some products and forming a diversified product system, It has a certain first mover advantage.
The company has a wide range of products, which can effectively meet the diversified purchase needs of diversified customers. As of 21q2, the company had more than 660 product specifications and formed a reserve of more than 100 product specifications. The company’s diversified product types and specifications are conducive to customers’ one-stop procurement, save customers’ procurement costs, improve customers’ procurement efficiency, and enhance customers’ demand stickiness.
The company has diversified sales channels and deepened customer service. The company’s marketing network continues to sink, the sales channels are gradually diversified, and the ability to resist risks is enhanced. At the same time, the company establishes a good relationship with customers by providing technical guidance and designing marketing plans for customers, establishes close contact between the company’s products and customer end products, enhances customer stickiness and improves the substitution threshold of other brands.
The company has strict cold chain monitoring and management. Most of the company’s products have very strict requirements on temperature, and they need to be stored and transported in an environment lower than minus 18 degrees. Therefore, the company has established a cold chain monitoring center and formulated and implemented a series of temperature management and control measures to ensure that the temperature of the whole circulation links such as warehousing and logistics meets the standard. By the end of 2020, the company has a certain scale of cold chain logistics capacity, and more than half of the customers in provinces, autonomous regions and municipalities directly under the central government have realized independent transportation.
Raised investment projects break through the bottleneck of production capacity. The company carries out capacity layout around the main markets of baking consumption in China. With the implementation of the company’s production base construction plan, in the future, the company will form three production areas in South China, East China and North China, and the networked layout of six production bases, which can effectively enhance the radiation to South China, East China and North China, the main battlefield of baking consumption, and enhance the market competitiveness.
Investment suggestion: Ligao Foods Co.Ltd(300973) as the first stock of frozen baked food, it has many first mover advantages, such as outstanding automatic production capacity and technical capacity, rich product types, diversified sales channels, leading cold chain construction and so on. With the implementation of the company’s production base construction plan, in the future, the company will form the network layout of three production areas and six production bases in South China, East China and North China, effectively improve the radiation to South China, East China and North China, the main battlefield of baking consumption, and enhance the market competitiveness. We expect that the company’s revenue in the year of 21-23 will be RMB 2.764/35.79/4.478 billion, with a year-on-year increase of 52.76% / 29.45% / 25.12%, the net profit attributable to the parent company will be RMB 283, 351 and 475 million, with a year-on-year increase of 21.92% / 24.12% / 35.23%, EPS will be 1.67, 2.07 and 2.8 respectively, and the corresponding PE will be 80.79, 65.09 and 48.13 respectively. Considering that the company is a scarce target in the freeze baking industry, it is rated “buy”.
Risk tips: the penetration rate of frozen baking is lower than expected, the price rise of raw materials, the capacity construction is lower than expected, the food safety risk, and the risk of intensified competition.
