Following Yantai China Pet Foods Co.Ltd(002891) , Petpal Pet Nutrition Technology Co.Ltd(300673) and Fubei pets, recently, Guabao pet, which is mainly engaged in pet food, also submitted a prospectus to the Shenzhen Stock Exchange to seek listing on the gem.
From the prospectus, Guaibao pet plans to raise about 600 million yuan, which is mainly used to expand the existing production capacity. Among them, the “pet food production base expansion construction project” will raise about 367 million yuan, accounting for 61.23% of the total fund-raising proportion. However, it is worth mentioning that the production capacity of Guabao pet has increased significantly during the reporting period, and the capacity utilization rate has decreased year by year. It is doubtful whether the new production capacity can be fully digested.
In just two years, the production capacity of Guaibao PET staple food series and snack series increased by 62.11% and 49.82% respectively, but at the same time, the production capacity utilization rate of the two categories also decreased to 61.98% and 86.56% respectively. Although the first half of 2021 was a sales off-season and the production capacity was not fully utilized, the overall production capacity utilization rate also showed a downward trend during the reporting period.
Private brand revenue accounts for more than 50%, and the net profit fluctuates greatly
It is understood that Guaibao pet is mainly engaged in the R & D, production and sales of pet food, including a variety of pet food for dogs and cats. The products are mainly divided into staple food series, snack series with livestock and poultry meat and fish as the main raw materials, and health product series containing freeze-dried lecithin, calcium lactate and other functional raw materials.
In addition, Guaibao pet’s products are mainly for large supermarkets or dealers. Although the proportion of direct sales mode for consumers has increased in recent years, it is still low. Therefore, Wal Mart and JD have always been the company’s main customers during the reporting period. However, the sales proportion for the top five main customers is gradually decreasing from more than 50% to about 35%.
From the history of Guabao pet, the company was founded in 2006. Even so far, foreign brands have firmly controlled the pet food market, and the voice of domestic private brands is still small. Therefore, Guabao pet, like most other pet food companies, only OEM ODM / OEM for large brands before 2013.
Up to now, the overseas market is still the main source of operating income of Guaibao pet. From 2018 to 2020 and the first half of 2021, the proportion of overseas business income in the current main business income is 55.64%, 46.07%, 48.17% and 46.63% respectively. Among them, the United States is the most important exporter of the company’s products. During the reporting period, the proportion of U.S. market sales revenue in the current overseas sales revenue reached 78.74%, 65.69%, 71.24% and 58.12% respectively.
Until 2013, Guabao pet set up its own brand “mcfudi” and also brought its attention back to the Chinese market. From the prospectus, the proportion of Guabao pet’s own brand sales revenue in the current main business revenue during the reporting period has reached 40.65%, 50.4%, 49.55% and 50.94% respectively.
On the whole, the performance of Guabao pet is not stable and has great profit fluctuations. From 2018 to 2020 and the first half of 2021, Guabao pet achieved operating revenue of 1.221 billion yuan, 1.403 billion yuan, 2.013 billion yuan and 1.083 billion yuan respectively, and the net profit attributable to the parent in the same period was about 44.522 million yuan, 4.1602 million yuan, 111 million yuan and 42.8941 million yuan respectively.
In 2021, on the basis of its own brand, Guaibao pet began to acquire waggintrain, a well-known pet brand in the United States, and became the agent of k9natural and feline natural, a well-known brand in New Zealand, laying out the high-end pet food market. In the first half of 2021, the gross profit margin of the agency business also exceeded 55%.
Nearly 20% of the revenue is used for marketing, and the net interest rate is the lowest in the industry
Due to the existence of objective factors such as pet feeding attitude, conditions and development history, European and American pet food, supplies and medical markets have a higher degree of development, and the brand competition is more intense. On the contrary, the Chinese market is still a blue ocean, there is no dominance, and the industry dispersion and concentration is low.
In fact, the low profit of pure OEM and the price difference earned by middlemen are applicable to all industries. During the reporting period, the gross profit margin of Guaibao pet’s main business is 32.12%, 28.87%, 33.12% and 31.49% respectively. In breakdown, the maximum gross profit margin of direct sales channels of private brands can reach 58.29%, and the lowest is only 21.43% under the OEM mode of overseas sales, There is a very large profit margin difference.
Therefore, no matter the Yantai China Pet Foods Co.Ltd(002891) , Petpal Pet Nutrition Technology Co.Ltd(300673) that has been listed, or the current Guabao pets are actively seizing the Chinese market. For Guabao pets, one of the means to enter the Chinese market is to increase investment in marketing and promotion.
Obviously, the young group is the backbone of the new pet group. While pursuing cost performance, they are also more receptive to the newly emerging state-owned brands. As the main audience of Pan entertainment content consumption, Guabao pet invited Nicholas Tse, Yin Haoyu, a member of into1, and Li Zhuxian, a member of Korean rock band royalpirates, as the company’s image spokesperson according to their consumption habits.
In addition, we also cooperated with CCTV-3 “Hello life”, Hunan Satellite TV “yearning for life” and “please listen to friends”, Beijing Satellite TV “Shangxin · Forbidden City”, Zhejiang satellite TV “good voice of China”, Jiangsu Satellite TV “our band”, Tencent video “unforgettable restaurant” and other variety programs, At the same time, it also covers the film and television drama “just thirty” and mobile game “Xiaosen life” and other multi category channels.
With such a great momentum of publicity and promotion, the sales expenses of Guaibao pets in the reporting period reached 167 million yuan, 246 million yuan, 341 million yuan and 188 yuan respectively, accounting for 13.65%, 17.53%, 16.93% and 17.4% of the operating revenue in each period, showing an upward trend as a whole.
Among them, the business publicity expenses are 49.9635 million yuan, 79.0157 million yuan, 124 million yuan and 69.313 million yuan respectively, accounting for 29.98%, 32.13%, 36.46% and 36.79% of the current sales expenses respectively. Not only does the proportion increase year by year, but also the expenditure item with the highest proportion in the sales expenses of each period.
In fact, compared with the four pet industries that have been listed and submitted the prospectus, the sales expense rate of Guabao pet is much higher than that of the other three. When the sales expense rate of Guabao pet reaches 13.13% in 2020, the other three companies do not exceed 10%.
The increase in expenses also squeezed some profit margins. During the reporting period, the net interest rates of Guaibao pets were 3.65%, 0.3%, 5.54% and 3.92% respectively, which were the lowest among the comparable companies in the four industries.
