\u3000\u3 Bohai Water Industry Co.Ltd(000605) 077 Zhejiang Huakang Pharmaceutical Co.Ltd(605077) )
Taking advantage of the global xylose fermentation, the company is now the invisible leader of sugar substitutes
The company is the second largest xylitol producer in the world and the largest xylitol producer in China. A few months ago, the company has formed a flexible business strategy with xylitol as the main, sorbitol + maltitol + fructose glucose syrup as the auxiliary and erythritol as the main. In 2018, the company's Xylitol output accounted for about 48% in China and 19% in the world in the same period. It is a well deserved leading enterprise in the field of xylitol. From 2017 to 2020, the company's operating revenue CAGR was 13%, and the net profit attributable to the parent company CAGR was 76%. Taking advantage of the east wind of the industry, the company achieved rapid growth.
What are the opportunities of the times for the sugar substitute industry?
The rise of sugar free demand in China, coupled with the catalysis of national policies and opinion leaders, has driven China's sweeteners into the stage of sugar alcohol replacing syrup, and the sugar substitute industry is in the ascendant. In retrospect, the global sweetener industry has experienced three major renewal iterations of sugar cane candy, glucose syrup and sugar alcohols. Each iteration contains the marginal drive of demand + sweet price ratio, as well as policy guidance and flag raising platform catalysis of opinion leaders. In recent years, the optimization of sugar alcohol sweet price ratio has achieved resonance under China's high sugar free demand and technological upgrading. It also coincides with the introduction of the policy of healthy China 2030 and the birth of the "opinion leader" vitality forest. The sweetener industry is experiencing unprecedented opportunities of the times. In horizontal comparison, China's Xylitol per capita penetration rate in 2019 was only 1 / 20 of that of the United States in the same period, and there is huge room for improvement in the future.
Zhejiang Huakang Pharmaceutical Co.Ltd(605077) accumulated what kind of advantage endowment?
1) the industry's cyclical confrontation ability. Single variety sweeteners are periodically affected by the relationship between supply and demand. The company has multiple sugar and alcohol production lines, is not afraid of the periodic changes of single products, and has completed many successful camera choices in history.
2) technology R & D capability. By the middle of 2020, the company has been granted 20 invention patents and 49 utility models, and has industry-leading technical advantages in the field of preparing xylose from hemicellulose lye, so as to achieve cost reduction and efficiency improvement through technical means. 3) Ability to grasp the general trend of the industry. In the middle of 2020, the company caught the high demand for erythritol products in the market and quickly opened the layout of the production line. The company is expected to be put into operation before May 2022, and is expected to rapidly increase the company's performance after it is put into operation.
Profit forecast and valuation
The company's main business is food sweetener manufacturing. We expect that from 2021 to 2023, the company's revenue will reach 1.395/18.122374 billion yuan, with a year-on-year increase of 5.72% / 29.89% / 30.98%, and the net profit attributable to the parent company is expected to reach 206 / 318 / 495 million yuan, with a year-on-year increase of - 32.94% / 54.60% / 55.49%, corresponding EPS of 1.26/1.95/3.03 yuan / share and PE of 29 / 19 / 12 times. Considering that the company has broad prospects and certain competitiveness, we give the company 16 times PE in 2023 (corresponding to 25 times in 2022), with a corresponding market value of about 7 billion yuan, which is still more than 15% more than the current market value. It is covered for the first time and given a "overweight" rating.
Risk tips: product price fluctuation risk, repeated epidemic risk, intensified market competition risk, etc.
