\u3000\u3 Bohai Water Industry Co.Ltd(000605) 337 Zhe Jiang Li Zi Yuan Food Co.Ltd(605337) )
Milk beverage leader, with 4-year performance CAGR exceeding 20%
Zhe Jiang Li Zi Yuan Food Co.Ltd(605337) , headquartered in Jinhua, Zhejiang Province, was established on October 22, 1994 and listed on the Shanghai Stock Exchange on February 8, 2021. From 2016 to 2020, the total revenue of the company increased from 453 million yuan to 1088 million yuan, and the four-year CAGR was 24.47%; The net profit attributable to the parent company increased from 102 million yuan to 215 million yuan, and the four-year CAGR was 20.30%. According to the latest data, the revenue in 2021 was 1.47 billion yuan, an increase of 35.14% at the same time; The net profit attributable to the parent company was 262 million yuan, an increase of 22.31% at the same time.
The industry has a high outlook, and it is possible to create another large single product
1) demand side: the retail market scale of milk beverage increased from 85.028 billion yuan in 2014 to 136182 billion yuan in 2019, and the five-year CAGR was 9.88%. Considering the epidemic situation in 2020 and the subsequent recovery, we expect the retail market to be 226.3 billion yuan in 2025; The retail market scale of the beverage industry increased from 465216 billion yuan in 2014 to 578.56 billion yuan in 2019, and the five-year CAGR was 4.46%. Considering the epidemic situation in 2020 and the subsequent recovery, we predict that the retail market will increase to 805.2 billion yuan in 2025. China’s demand for dairy drinks increased from 9.5208 million tons in 2013 to 173939 million tons in 2019, with a six-year CAGR of 10.57%. Considering the epidemic situation in 2020 and the subsequent recovery, we expect that the demand will increase to 27.72 million tons in 2025.
2) supply side: the output of milk beverage increased from 132494 million tons in 2015 to 173944 million tons in 2019, and the CAGR in four years was 7.04%; The output of the beverage industry increased from 176.61 million tons in 2015 to 177635 million tons in 2019, and the four-year CAGR was 0.14%. We believe that milk containing beverages can meet the needs of consumers for taste and health at the same time, and the output of milk containing beverages is expected to maintain steady growth in the future.
3) competition pattern: there is a rise in stability, and it is still possible to create another large single product. Cr5 increased from 33.84% in 2014 to 34.15% in 2018, and CR10 increased from 40.73% in 2014 to 42.26% in 2018. It is expected to rise steadily in the future. There have been billions or even billions of single products in the milk beverage market, such as AD calcium milk, nutrition express, wangzi milk, etc. we believe that enterprises with production capacity and channel advantages are still possible to create large single products.
Analyze the company from six angles, and the nationalization is accelerating
1) brand side: the company takes “new fresh Zhe Jiang Li Zi Yuan Food Co.Ltd(605337) , naturally fall in love with you” as its brand appeal and concept; Take “young consumer groups and youth leisure, nutrition and convenience” as the brand market positioning; Win the favor of target groups aged 15-35 with sweet taste and excellent quality.
2) product side: take sweet milk as the basic sector to push through the old and bring forth the new. New products such as fruit and vegetable drinks, milk coffee and coconut milk were launched in 2021. The sales of new products in that year was about 100 million yuan. It is expected that the sales of new products of the company will double in 2022.
3) canal end: the distribution mode has accounted for more than 95% of the revenue in recent five years. Direct selling is mainly carried out through e-commerce channels. It has successively cooperated with jd.com and tmall. The online sales increased from 5.68 million yuan in 2017 to 45.46 million yuan in 2020, and the CAGR in three years was 100%. In the past three years, the income of dealers who have cooperated for more than three years accounts for more than 60% of the distribution channels.
4) regional expansion: the company takes East China, central China and southwest China as the core areas. In 2020, the revenue and proportion of East China, central China and southwest China are 612 million yuan (57%), 205 million yuan (19%) and 177 million yuan (16%) respectively. It sinks through channels and radiates to the surrounding areas. The compound growth rate of emerging regions is obvious. The CAGR of sales in South China, North China, northeast and northwest regions from 2017 to 2020 are 101%, 41%, 106% and 91% respectively.
5) capacity side: the company has five production bases, including Zhejiang Jinhua, Zhejiang Longyou, Jiangxi Shanggao, Yunnan Qujing and Henan Hebi. In 2021, the company’s total production capacity will be about 300000 tons. Jiangxi and Longyou will expand their production capacity in phase II. It is expected that the company’s total production capacity will eventually reach 55 Shenzhen Zhongjin Lingnan Nonfemet Co.Ltd(000060) 0000 tons, which can meet the company’s national expansion needs in the next 2-3 years.
6) cost side: the company takes milk powder as the main raw material, accounting for more than 50% of the total cost. Generally, the price of milk powder in the second year is locked half a year in advance. The price of raw milk has an obvious upward trend this year, and the price of the company’s products may be increased.
Profit forecast
We are optimistic about the company’s continued large-scale new products and national expansion. It is expected that the EPS will be 1.21/1.56/1.94 yuan from 2021 to 2023, and the current share price corresponding to PE will be 30 / 23 / 19 times respectively, maintaining the “recommended” investment rating.
Risk tips
Macroeconomic downside risk, epidemic drag on consumption, new product promotion is less than expected, raw materials rise sharply, production capacity is less than expected, single product risk, etc.
