\u3000\u3 Bohai Water Industry Co.Ltd(000605) 016 Shandong Bailong Chuangyuan Bio-Tech Co.Ltd(605016) )
Key investment points
Shandong Bailong Chuangyuan Bio-Tech Co.Ltd(605016) : the leader of healthy food additives, riding the east wind of great health
Founded in 2005 and listed in 2021, the company is mainly engaged in the research, production and marketing of dietary fiber / prebiotics / health sweeteners (alodonose) and other products. The company is the world’s top two suppliers of dietary fiber and the top five suppliers of prebiotics, with a market share of 12% / 6% respectively in 2018. In 2020, the company was selected as the second batch of specialized special new “little giants” of the Ministry of industry and information technology of the people’s Republic of China; In 2021, the revenue / net profit attributable to the parent company was 653 / 105 million yuan, a year-on-year increase of + 30.77% / + 9.98%; in 22q1, the revenue / net profit attributable to the parent company was 198 / 41 million yuan, a year-on-year increase of + 47.92% / + 133.38%; The CAGR of revenue / net profit attributable to parent company in 201721 are 20.38%/13.18% respectively.
Prebiotics & dietary fiber: benefit from the healthy consumption trend, focus on high-end + capacity expansion → double rise of volume and profit, hoping to exceed the expected industry β： Within five years, the total market scale is expected to exceed 40 billion yuan, driven by nutritious and healthy food & infant food. Prebiotics play an important role in infant immune regulation and brain development. In 2020, the consumption of food and beverage / infant nutrition products accounted for about 59% / 28% respectively; Dietary fiber helps maintain digestive system health, prevent diabetes and cardiovascular diseases. In 2020, the demand for dairy products and beverages / health products and baby foods was about 48%/30%. It is estimated that the global output value of prebiotics / dietary fiber will reach 18.5 billion yuan / 22.9 billion yuan respectively in 2026, and the CAGR will be about 4.1% / 3.5% from 19 to 26. Company α： 1) It is estimated that the output increase will exceed 50% in 23 years and support the business volume: the company plans to add 30000 tons of soluble dietary fiber (mainly liquid) and 20000 tons of functional sugar drying capacity (powder), which is expected to be implemented in 23 years, with a total increase of more than 50%, and the scale effect will be further enhanced; 2) Flexible adjustment of production line and focus on high gross profit products: the company can allocate more production capacity to dietary fiber & high-end prebiotics according to customer needs (the gross profit margin of high-end products in 20 years is 10 PCT + higher than the comprehensive gross profit margin). The optimization of business structure is expected to further improve the gross profit margin.
Alodonose: the application of new sugar substitutes is expected to enter the industry, with production capacity landing + solid barriers → explosive & sustainable β： Sugar substitute tuyere Zhengsheng + regulatory access is advancing steadily, and the inflection point of permeability improvement is approaching. Alodonose is a new generation of natural sweetener that has attracted much attention in the industry. Its taste / safety / stability is close to sucrose, and it has health care effects such as intestinal maintenance / blood glucose control. In 2019, the FDA of the United States allowed the application of alodonose as a “0 sugar” component, and the market is in short supply. It is expected that the EU and China are also expected to achieve application access in the next step. In the future, the penetration of alodonose in China’s sugar free soft drinks (CAGR is expected to exceed 20% in 20-24 years) / tea drinks (CAGR is expected to be 24.5% in 20-25 years) / baking (CAGR is expected to be 12.27% in 20-23 years) and other fields is expected to accelerate and even surpass the growth rhythm of erythritol (CAGR is expected to be 20.4% in 15-17 years and 134.7% in 17-21 years).
Company α： 1) High increase in crystal production capacity and strong certainty of performance explosion: it is expected that the company’s 15000 tons of crystal sugar production capacity will be put into operation by the end of the year 22, and the production capacity of alodonose crystal is expected to increase nearly three times. The process of crystal is more complex than liquid products and the gross profit margin is higher. Since the launch of the product, it has been produced and sold as much as possible. After the new production capacity is put into operation, it is expected to reach the production capacity quickly and support the high growth of revenue / performance;
2) based on the advantages of process & scale, continue to benefit from the high prosperity of the industry. Alodonose has high technological barriers and slow global capacity expansion. The company is the first enterprise in China to realize the large-scale production of alodonose. It is at the industry leading level in multi link technologies such as strain optimization, sugar making and crystal making. After the implementation of the new capacity, its competitive advantage will be consolidated, and it is optimistic about the sustainability of medium and long-term growth.
Competitive advantage: R & D enables product innovation, customized services, binding well-known large customers
1) based on R & D, with leading technical strength & strong product iteration engine. The company has established several provincial R & D platforms and reached industry university research cooperation with well-known universities and research institutes; By the end of the 21st century, the company has obtained 38 invention patents and 1 utility model patent, and the production technology of core products has reached the leading level in China; The company can provide more than 60 kinds of prebiotics and dietary fiber products, and has reserved lactofructooligosaccharides, lactofructose γ – Polyglutamic acid, anti digestive starch and other new products. 2) From point to area & focus on breakthroughs, accumulate customer first mover advantages, and enhance the stickiness of one-stop service. By the end of the 20th century, the company had established cooperation with well-known enterprises such as questnutrition, general mills, Wahaha, nongnongshanquan, Mengniu, Yili, China Wangwang, Wang Laoji, By-Health Co.Ltd(300146) , Herbalife, China Feihe, etc., with first mover advantages and high barriers for new players to enter; The company has the ability to provide customized products and services on demand, meet the one-stop needs of customers, and then enhance customer stickiness (the revenue of customized products increased from 2.57% to 7.05% in 18-20 years). The stable cooperative relationship with well-known customers is also conducive to the rapid introduction of new products and the smooth expansion of new business.
Profit forecast and valuation
It is estimated that the company will achieve a revenue of 653 / 879 / 1294 million yuan in the 21st-23rd year, with a year-on-year increase of + 30.77% / + 34.47% / + 47.29%, and a net profit attributable to the parent company of 105 / 191 / 291 million yuan, with a year-on-year increase of + 9.98% / + 82.07% / + 52.25%, corresponding to EPS of 0.83/1.51/2.30 yuan. The current price corresponds to PE 39 / 21 / 14x, 30 times the PE of the company, corresponding to the 22-year target price of 45.3 yuan. The first coverage is given a “buy” rating
Risk tips
Overseas market development is less than expected risk; Risk of higher than expected rise in raw material costs; The risk of intensifying Sino US trade friction; Risk of Technology & products being replaced.
