Cabio Biotech (Wuhan) Co.Ltd(688089) (688089)
Report summary
Core view: This paper focuses on answering the three key questions of “how to understand the industry growth”, “where does the high profit margin come from” and “where is the future driving force”. We believe that the industry growth lies in the innovation from the bottom technology to the top application. The high profit margin comes from the high barriers jointly built by technology, qualification and scale. The company’s medium-term performance has the capacity expansion of the new national standard of milk powder DSM’s patent protection expired, SA’s new cosmetics raw material filing and other multiple drivers. We are optimistic about the growth and long-term competitiveness of Cabio Biotech (Wuhan) Co.Ltd(688089) .
Cabio Biotech (Wuhan) Co.Ltd(688089) : leading supplier of microbial fermentation nutrients. The company produces nutrients by microbial synthesis. At present, its customers include Danone, Beingmate Co.Ltd(002570) , Yili, Feihe, JUNLEBAO, Shengyuan, Yashili, By-Health Co.Ltd(300146) and other well-known enterprises at home and abroad. In recent 5 years, the company’s revenue / net profit attributable to parent company CAGR reached 12.29% / 46.21% respectively.
2、 How to understand industry growth? Innovation from bottom technology to top application. (1) Microbial fermentation is one of the mainstream paths of nutrient production, which is in line with the green and healthy trend and has imagination space in the future. (2) the downstream applications of algal oil DHA and Ara industries continue to expand, the market is gradually growing, and the growth rate of China’s market is expected to be faster.
3、 Where does high profit margin come from? Technology, qualification and scale build barriers together. (1) Technical barriers: technical and technological barriers form a high threshold for the industry, and the technical advantages are reflected in the oil yield, extraction rate and embedding rate, and finally reflected in the product cost performance. (2) qualification barriers: nutrient products must first pass the market access license of relevant national food control regulations; infant powder manufacturers have a long process of developing suppliers, and downstream customers have strong stickiness. (3) Scale barrier: the production of Ara and algal oil DHA has been greatly expanded, with obvious scale effect. At low unit cost, the company has flexible pricing and obvious price advantage.
4、 Where are the future drivers? Triple surprises bloom again and again. (1) Main business: the expansion of the new national standard for milk powder and the expiration of DSM patent protection. ① China: the new national standard for milk powder is expected to bring strong deterministic performance growth. ② overseas: DSM patent protection will expire one after another before June 2023. The overseas market has completed the layout of dealers and supply chain, with both volume and price rising and smooth logic. (2) The second growth curve: SA has scarce qualification and rich reserves of new products. ① Sa: new cosmetics raw materials have been put on record, which has been independently supplied by the company up to now. ② products under research mainly include structured lipid OPO, fucosyllactose and sialic acid lactose (HMOs), which is expected to become a new growth point of the company in the future.
The industry has high barriers to entry, and the space is expected to be further opened. At the same time, the company’s medium-term performance has catalysis. We are optimistic about the company’s growth and long-term competitiveness. We estimate that the company’s revenue from 2021 to 2023 will be 369 million yuan, 530 million yuan and 795 million yuan respectively, the net profit attributable to the parent company will be 157 million yuan, 216 million yuan and 325 million yuan respectively, the EPS will be 131 million yuan, 1.80 million yuan and 2.71 yuan respectively, and the corresponding PE in 22 and 23 years will be 34 times and 23 times respectively.
Risk tips: food safety risk, risk of sharp rise in raw material prices, risk of deviation in industry market space measurement, risk that the company’s new production capacity is not put into operation as expected, customer concentration risk, patent risk, and the public data used in the research report may have the risk of information lag or untimely updating.
