Xinjiang Tianrun Dairy Co.Ltd(600419) (600419)
1、 Event overview
On December 28, 2021, the company issued a report on the issuance of non-public A shares. As of December 10, the company had issued 51.5909 million non-public shares to 17 specific issuers at an issue price of 11.00 yuan / share, with a total raised capital of 567 million yuan. After deducting the issuance expenses, the net raised capital was 556 million yuan.
2、 Analysis and judgment
We will continue to raise funds to build upstream pastures and continuously improve the self-sufficiency rate of raw milk
According to the non-public offering plan issued by the company on March 28, it is planned to invest the raised funds in the construction project of 10000 large-scale dairy cow demonstration pasture in Tianrun Beiting, supplement working capital, and invest 397 / 170 million yuan respectively. By the end of June 2021, Tianrun has 16 large-scale pastures with 31200 heads in stock, and the self-sufficiency rate of raw milk has reached 69%, which is the highest proportion of milk source self-control among listed dairy enterprises. In the short term, the price of raw milk rises, the self-sufficiency rate of raw milk is high, and the cost side fluctuation is effectively smoothed; In the long run, the stability of raw milk procurement is higher and the quality is more guaranteed, which is conducive to the steady development of production and operation and the expansion of high-end product matrix. The fund-raising project Tianrun Beiting ranch is located in group 222, adjacent to Urumqi, which will help the company continue to consolidate the core advantages of Wuchang and take a key step in rapid development. In addition, 5000 standardized pastures cooperated by Bachu county are under construction, and Shandong Qiyuan pastures are under planning. It is expected that after completion, it will further improve the self-sufficiency rate of raw milk, match the production and operation planning, and promote the expansion of market layout in southern Xinjiang and outside Xinjiang.
The continuous construction of production capacity in southern Xinjiang and outside Xinjiang has promoted the steady expansion of downstream market
At the downstream channel level, Tianrun has established a full advantageous position in Xinjiang and is actively exploring the markets in southern Xinjiang and outside Xinjiang. In the first three quarters of 2021, Tianrun achieved revenue of RMB 981 million / 588 million respectively in Xinjiang / outside Xinjiang, with a revenue of + 17.14% / + 22.94% respectively. The market outside Xinjiang returned to the rapid growth channel to verify the positive and effective layout outside Xinjiang. The 30000 ton production line of tangwangcheng in southern Xinjiang has been put into operation in the first half of this year, covering Kashgar, Aksu and other important population towns closely, alleviating the capacity bottleneck and promoting the market layout of Southern Xinjiang. At the same time, the production base of tangwangcheng reserves sufficient incremental space to lay the development potential in the later stage. Markets outside Xinjiang concentrate on expanding core provinces and focus on cost support. In September, Tianrun signed a cooperation agreement with Shandong Qiyuan development group to jointly build a dairy processing base, dairy farming and forage planting base. In December, Tianrun Qiyuan dairy company has been established in a joint venture. It is planned to invest 400 million yuan in the first phase of the project and build a 100000 ton dairy processing plant. At present, all cooperation work is steadily advancing. The construction of production capacity in Shandong marks a key step for the company’s expansion outside Xinjiang. In the future, based on this, it will cover Shandong and surrounding core areas closely, alleviate the problem of long distance for Xinjiang enterprises out of Xinjiang, and improve the market awareness outside Xinjiang.
3、 Investment advice
According to the company’s recent operation, we adjusted our previous profit expectations. It is estimated that from 2021 to 2023, the company will realize an operating revenue of RMB 2130 / 2398 / 2789 million, a year-on-year increase of + 20.5% / + 12.6% / + 16.3%; The net profit attributable to the parent company was 149 / 166 / 189 million yuan, a year-on-year increase of + 1.4% / + 11.0% / + 13.9%. After considering the fixed increase, the diluted EPS was 0.47/0.52/0.59 yuan respectively, and the corresponding PE was 29x / 26x / 23x, The company’s valuation is significantly lower than the expected average 40x / 29x of the dairy industry in 2021 / 2022 (wind consensus expectation, arithmetic mean method). Considering the company’s stable domestic market position, capacity overweight and channel expansion, the “recommended” rating is maintained.
4、 Risk tip: the promotion of new products is less than expected, the expansion of channels is less than expected, and the price of raw milk rises sharply.
