\u3000\u3 Bohai Water Industry Co.Ltd(000605) 337 Zhe Jiang Li Zi Yuan Food Co.Ltd(605337) )
The first share of sweet milk in China, dominated by regional dealer model: 1) in terms of equity structure, the company’s equity structure is relatively centralized and stable, and employee stock ownership stimulates the vitality of the company; 2) In terms of brand power, after more than 20 years of accumulation, excellent reputation, high quality and strong appeal have created a strong brand power; 3) In terms of products, sweet milk is the core single product of the company (revenue accounts for more than 90%), with outstanding advantages, and sales volume is the main driving force of performance; 4) In terms of channels, the company has established an all-round marketing management system, dominated by distribution mode and supplemented by direct sales mode (the income of distribution mode accounts for more than 95%), and more than half of the income contributed by old merchants / big merchants shows strong stability; 5) In terms of market, the company has been deeply engaged in the base camp in East China for more than 20 years. While consolidating the market advantages of Jiangsu, Zhejiang and Shanghai, the company has intensively cultivated the key core markets in Yunnan, Guichuan, Shandong, Henan and Anhui, radiated and driven the surrounding regional markets, and is gradually realizing the transformation from regional layout to national layout; 5) In terms of finance, from 2016 to 2020, the company’s revenue increased from 453 million yuan to 1088 million yuan, with a CAGR of 19.15%; The net profit attributable to the parent company increased from 102 million yuan to 215 million yuan, the CAGR reached 13.84%, the gross profit margin of sales was stable at about 34-41%, and the profitability was better.
The milk beverage industry has a broad space and fertile soil for breeding large single products. 1) Spatial pattern of milk beverage industry: the total output value of milk beverage from 2013 to 2018 was 13.38% (higher than that of beverage industry by 2.42%), accounting for 15.1% of the total output value of beverage industry from 9.1% in 2013. With the improvement of residents’ consumption level, diversified demand promoted the growth rate of milk beverage higher than that of dairy products / soft drinks. At present, it is in the stage of high growth, and the competition pattern of the industry is stable; 2) Secret of sweet milk big single product: brand, channel and product barrier.
The company’s core focus: entering the accelerated stage of scale expansion, we are optimistic about the improvement of profitability under national expansion. We believe that 2022 will be the year when Zhe Jiang Li Zi Yuan Food Co.Ltd(605337) really begins to accelerate its nationalization. The main reasons are as follows: 1) the increase of channel volume / quality is the basis of Nationalization: Zhe Jiang Li Zi Yuan Food Co.Ltd(605337) ‘s high channel profit is the core thrust + product strength / brand strength is gradually enhanced + standardized management system & stable policy is the main reason for attracting dealers to join; 2) The accelerated growth trend of the 100 million market is significantly the result of Nationalization: with the increasing refinement of regional marketing, it is expected that Henan, Anhui, Jiangxi and other regions will be added in 2022 on the basis of the company’s original 100 million markets such as Jiangsu, Zhejiang, Shanghai and Yunnan, and at the same time, the market of more than 50 million is accelerating its expansion at a growth rate of 50% +; 3) The continuous implementation of production capacity is a guarantee for Nationalization: due to the rapid growth of demand, the company previously solved the problem of insufficient production capacity by increasing the proportion of outsourced processing. With the company’s expansion of production through IPO raising and investment plus foreign investment, it is expected that the company can finally achieve a production capacity of more than 550000 tons and increase the total annual profit by 200 million. On this base, we believe that the core logic of the company is: under the effect of scale, the unit cost decreases (the self owned capacity increases + the proportion of outsourcing decreases + the capacity utilization increases) + the ton price increases (price increases and high priced new products are launched) + the cost rate control is stable = the gross profit margin increases.
Profit forecast and Valuation: it is estimated that the growth rate of the company’s revenue from 2021 to 2023 will be 35.2%, 29.7% and 24.3% respectively; The growth rate of net profit was 22.3%, 30.5% and 25.3% respectively; EPS is 1.2, 1.6 and 2.0 yuan / share respectively; PE was 26, 20 and 16 times respectively. Considering the strong certainty of the company’s annual performance, the current valuation is very cost-effective, and the buy rating is given for the first time.
