\u3000\u3 Jointo Energy Investment Co.Ltd.Hebei(000600) 887 Inner Mongolia Yili Industrial Group Co.Ltd(600887) )
Event: Yili's tender offer for Aoyou was successful. On March 3, Yili announced that as of that day, the company held or controlled 953163623 shares of Aoyou dairy, accounting for about 52.70% of the total issued shares of Aoyou dairy, marking that the company has officially become one of the two giants in China's milk powder industry.
Comments:
The good news of the milk powder track is frequent, and Yili's mid-term breakthrough is imminent. Over the past two years, the market share of Yili milk powder business has continuously increased, from 5.80% in early 2020 to 8% in September 2021. The growth rate in the first three quarters of 2021 exceeded 30%, with a rapid upward momentum. With the success of this acquisition, the company will cooperate with Aoyou in many aspects, impact the medium and high-end and ultra-high-end infant powder market respectively through its own brand jinlingguan and Aoyou related brands, strengthen Yili's strategy of breaking through in the medium-term milk powder market, and rewrite the competition pattern of the largest sub category of dairy products.
Consolidation will significantly improve EPS and reduce valuation. Based on the assumption of consolidation at the end of March 2022, we expect that the company's EPS in 22 and 23 years will increase from 1.74/2.08 yuan before consolidation to 1.89/2.50 yuan, the profit growth rate will increase from 19.6% / 19.7% to 30.0% / 32.1%, and PE will decrease from 23x / 19x to 21x / 16x. The company's valuation advantage will be further highlighted.
Profit forecast and investment rating: under the epidemic, the demand for white milk continues to be strong. The company presses the warehouse with liquid milk business, takes the improvement of gross sales difference and the growth of milk powder business as the medium and short-term focus, and looks forward to a clear and unexpected possibility. We estimate that the EPS from 2021 to 2023 will be 1.45/1.89/2.50 yuan, and give 30x PE in 2022 with a target price of 57 yuan to maintain the "buy" rating of the company.
Risk factors: food safety problems and intensified industry competition.
