In the past, the leader of domestic milk powder, the founder returned to start a second business.
The founder of the company left after going public in 2011, and the company experienced management changes, lower milk powder prices, Fonterra shares and withdrawal. The founder returned to the company in 2018 and his performance gradually picked up.
High-end plus functionalization to boost the industry, domestic brands are expected to rise again. China's infant milk powder market is expected to increase from 160.5 billion yuan in 2014 to 342.7 billion yuan in 2023, with 9% CAGR in 9 years. 1) at present, the overall volume of the industry has decreased and the number of babies born has dropped to 10.62 million in 2021, and the average retail price of infant milk powder is expected to rise from 183 yuan / kg in 2014 to 235 yuan kg in 2023. 2) the current CR3 market share of the industry has increased from 25% in 2015 to 38% in 2020, and the market share of domestic brands has increased from 40% in 2014 to 49% in 2019. The market share of ultra-high-end milk powder and high-end milk powder is expected to rise from 7% and 15% in 2014 to 26% and 32% in 2023, respectively. 3) Special medicine milk powder has the potential for development: the post-90s become the main consumer, paying more attention to the refinement of functions. 4) the proportion of retail size in the low-line market is expected to rise from 52% in 2014 to 56% in 2023, while the proportion of mother-and-baby stores and online stores will rise from 35% and 10% in 2014 to 60% and 26% in 2023, respectively.
The brand of big country is reborn, and the empowering channel of "digital intelligence"
1) in terms of brand, it was selected as the "big country brand" of CCTV in 2020, and became a domestic brand actively promoting "intelligent manufacturing in China". 2) the products mainly have four major businesses: milk powder, supplementary snacks, milk nutrition and innovative business, among which "Ke Ruixin" and "Aijia Organic A2" are expected to become big single products. 3) on the channel, the distributor / total underwriter channel accounts for 42% and 20% respectively in 2021, and the guarantee channel profit direct supply customer model will be promoted in the future. 4) fresh milk / milk powder / whey powder is the main raw material, accounting for 84% of the cost. 5) operational efficiency has improved significantly, with inventory turnover rising to 2.61 and accounts receivable turnover rising to 3.67 in 2021.
Profit forecast
We estimate that the EPS for 2022-2024 will be 0.12 pound 0.17 pound 0.24 yuan, and the current share price will be multiple of 42-30-21 corresponding to PE, maintaining the "recommended" investment rating.
Risk hint
Macroeconomic downside risks, epidemic drags down consumption, new product promotion is not as expected, raw materials rise sharply, innovation business is not as expected, and so on.
