Investment summary:
The supply-demand relationship of raw milk is expected to shift from shortage to tight balance, and the cost inflection point can be seen. From the demand side, China's per capita consumption of dairy products is still a certain distance from developed countries, and the long-term industry prospect is broad. At present, the per capita consumption of dairy products in European and American countries has reached more than 100kg; Asian countries such as Japan and South Korea, which have a similar diet structure with China, also have a per capita consumption of more than 60kg; In 2019, China's per capita consumption of fresh milk was only 35.8kg; In the rural areas where the market is sinking, the consumption can be as low as 3-5kg, and 10kg in some rich villages and towns. In the short term, the epidemic situation has catalyzed the improvement of national health awareness, and the demand for dairy products, especially basic white milk, is strong. According to Nielsen data, after the epidemic, China's demand for liquid milk continued to grow rapidly. The growth rate of low-temperature fresh milk exceeded 25%, and that of normal temperature white milk also reached 20%. At present, the growth rate is relatively gentle and predictable, and the possibility of sharp demand increase is small. From the supply side, the stock of dairy cows in China has stabilized and rebounded, the single output of dairy cows has been expanding, the trend of pasture concentration and scale has been deepening, and the supply will be released gradually in the future; The upstream and downstream layout of dairy giants will be deepened, the periodic fluctuation of capacity demand and layout will be weakened, and the sharp fluctuation of milk price will be weakened. We believe that the inflection point of milk price is expected to be observed next year.
It is expected that the gross sales difference of dairy enterprises will continue to expand and the profitability will continue to improve. The rising cost prompted the midstream dairy enterprises to take measures such as raising prices and reducing terminal promotion expenses, which objectively improved their profitability: the resonance of multiple factors such as raising prices of terminal products, slowing down promotion and reducing advertising investment of dairy enterprises increased the company's gross profit margin, reduced the expense rate and increased the gross sales difference in the short term; After the decline of raw milk price cycle, the company's net interest rate has been released for a long time; At the same time, the rising cost prompted the company to actively upgrade the product structure and optimize the product structure. We believe that under the judgment that the milk price is expected to slow down next year, the profitability will be further released. Many factors, such as the slowdown of cost investment, the clearance of small and medium-sized enterprises and the improvement of industrial barriers, have further optimized the industrial competition pattern. The dairy duopoly has a high expense rate for a long time. Every year, huge expenses are invested in the advertising end and terminal promotion end, which occupy the minds of consumers, resulting in fierce competition in the industry and damage to the profitability of enterprises. Under the pressure of raw milk cost, the duopoly reduced terminal promotion and advertising, which not only objectively improved the profitability, but also slowed down the high cost rate competition situation of the industry, and the industry pattern was further stabilized and optimized. At the same time, the sharp rise in costs and the shortage of raw milk make it difficult for small and medium-sized dairy enterprises to receive sufficient raw milk, clearing a large number of local small and medium-sized dairy enterprises; Leading enterprises with strong financial strength will gradually arrange more upstream milk sources, the concentration of milk sources will continue to improve, the barriers to entry of the industry will continue to improve, and the share of leading markets will also accelerate. Investment suggestion: we are optimistic about the dairy sector. In the long run, under the background of increased concentration and increasingly stable pattern, the industry is expected to get rid of the original price war competition and turn to the benign competition of differentiation, innovation and structural improvement in the future. In terms of upstream cost changes in the industry, we judge that the supply-demand relationship of raw milk will gradually shift from shortage to tight balance next year, so that the milk price is expected to stabilize and fall, thus further releasing the profit space of the industry. Continuous tracking is recommended:
Inner Mongolia Yili Industrial Group Co.Ltd(600887) (600887. SH): the company is the largest dairy enterprise in China with the most complete product categories, the top camp of the global dairy industry and the first dairy industry in Asia. Under the condition of firmly being the first in the liquid milk industry, the company has recently clearly proposed that the milk powder business will enter the first two or five years of the industry next year; cheese and low-temperature fresh milk will all be the first in the industry; and it has proposed that the top three and 203 in the global dairy industry in 2025 The first strategy of global dairy industry in 2000. We believe that under the background of industry pattern optimization, the company's gross sales difference is expected to be further optimized, so as to lay a solid foundation for achieving the goal of net interest rate. The growth rate of milk price is expected to gradually decline, further laying the foundation for the expansion of the company's gross sales difference and the target of net interest rate; The trend of product innovation and structure improvement of the company remains unchanged; The competition pattern is expected to continue to ease. The company will continue to benefit from the slowdown of industry competition, pattern optimization and concentration improvement, so as to achieve business and performance objectives.
Risk tip: the epidemic has led to the decline of social zero again. The substantive depression of the economy and the lack of confidence in economic recovery have led to the lack of consumption power.
