Tianjin Yiyi Hygiene Products Co.Ltd(001206) (001206)
Investment logic
Card pet high-quality track, deeply engaged in the export business of sanitary products. Based on the OEM business of pet sanitary products, the company produces and sells disposable pet sanitary care products, non-woven fabrics, etc. at the same time, it is cultivating and developing its own brand. In the first three quarters of 2021, the revenue was + 2.2% year-on-year, and the net profit was – 38.57% year-on-year.
Pet hygiene products: the concentration of overseas markets has increased, and there is a lot of room for early penetration in China. Overseas pet consumption showed resilience under the epidemic. In 2020, the growth rate of pet consumption in the United States was 8.6%, which benefited from the centralized distribution of channels and the mature OEM mode, and preferred to choose a professional high-quality supply chain. China’s pet products are scattered, and the awareness of hygiene, environmental protection and civilization drives the penetration of sanitary urine pads.
Export business is the main business, and China’s business is actively developing and exploring. 1h21’s overseas business accounts for 92.5%. With strong quality and cost advantages and high turnover depth, it binds Wal Mart and other leading overseas customers. The top ten revenue accounts for 72% / 70% / 63% from 2018 to 2020. It is expected that overseas mature customers will continue to explore and lay a solid foundation for growth. In the Chinese market, based on the replication of the underlying capabilities of the supply chain and product power, it has conducted in-depth cooperation with Huayuan, Chongxing and other online brands, and will expand customer space in the future.
Category extension: urine pads benefit from permeability improvement + product upgrading, and urine pants can grow under low permeability. The company builds a pet track competitiveness system based on pain point product upgrading + improving product matrix. The growth point of urine pad in the future comes from the increase of China’s penetration & the increase of share and the increase of average price brought by product upgrading. The growth point of diapers comes from the improvement of permeability, and the product structure is optimized with the advantage of high gross profit margin. The gross profit margin of diapers is 20-30pct higher than that of diapers. From the perspective of industrial chain extension, the company actively extends the non-woven industrial chain upstream to reduce cost fluctuations.
The new capacity raised by IPO is mainly urine pad, and the application of non-woven fabric is expanded. The net amount raised by IPO is 975 million yuan, which is used for pet pad / pet diaper / health care materials projects, with the amount of 386 / 114 / 254 million yuan respectively. After reaching the production capacity, it is expected to add 2.25 billion pieces / 220 million pieces / 31000 tons. Among them, 700 million pet pads and 120 million pet diapers have been partially put into operation.
Investment advice and valuation
We estimate that the company’s EPS from 2021 to 2023 will be 1.53 yuan, 1.90 yuan and 2.25 yuan respectively, and the current share price corresponds to 30 / 24 / 21 times of PE. Considering the steady expansion of the company’s production capacity and the cost advantage created by the upstream self-built non-woven production line, we use the P / E ratio relative valuation method to give the company a valuation of 26x in 2022, corresponding to the target price of 49.3 yuan and an “overweight” rating.
Risk statement
The risk of gross profit margin fluctuation caused by the sharp fluctuation of raw material price; The risk that the project under construction cannot achieve the expected income; In May 22, the ban on IPO restricted shares was lifted; Exchange rate fluctuation risk
