A leading domestic pet products manufacturer and best-selling global company for OEM products has been focusing on the R&D, production and sales of pet products and pet food since its establishment in 2004. The main products include pet products such as pet leashes, pet injection toys, pet snacks such as dog bite glue, etc. It is one of the earliest enterprises to enter the pet industry in China. The company has now become a large-scale domestic pet products manufacturer, with an advantageous position in the field of pet leashes. In 2021, the company achieved revenue of 1,069 million yuan, an increase of 75.71% over the previous year, CAGR reached 34.9% in 2018-2021, and 22Q1 achieved revenue of 350 million yuan, an increase of 40.36% over the previous year. In terms of profitability, 2022Q1's gross margin was 26.46%, and the net profit margin was 18.17%.
High-quality customer sources drive sustainable development, channel barriers reinforce competitive advantage The company's product sales market covers many countries and regions with developed pet markets such as the United States, Europe, and Japan. It has long-term, stable and continuous cooperation with internationally renowned professional pet product chains and large chain retailers, such as American pet products retail giants Petco and PetSmart, well-known European pet products chain Pets AtHome, and major international retail chains such as Walmart and Target. At the same time, the company's products have obtained many certifications and are continuously consolidated Sales channel barriers. The company's overseas sales are mainly OEM sales. In 2021, the company's overseas sales achieved revenue of 1,029 million yuan, accounting for 96.76%, of which North America achieved revenue of 780 million yuan, accounting for the largest share (73.63%), followed by Europe; domestic sales revenue was 34 million yuan, accounting for 3.24%.
Global research, production and sales layout, profitability is at the forefront of the industry, effectively coping with international trade frictions1) In the R&D process, the company set up cutting-edge research teams and design R&D centers in the US and Shanghai to quickly respond to target customer needs and maximize the transformation of consumer demand. In recent years, R&D investment has also risen year by year, reaching 25.44 million yuan in 2021, an increase of 38.34% over the previous year; 2) In the production process, the company has developed outstanding industrialization capabilities integrating insight into market demand, product design, production and process implementation. Profit margins have remained at the forefront of the industry in recent years.
In terms of production base, the company has set up production and processing bases in Pingyang County, Zhejiang and Cambodia based on the advantages of raw materials and production costs. Currently, the two production bases set up in Cambodia Aitao and Cambodia Ryder have been gradually put into use. Since the second half of 2020, they have achieved sales revenue. They have obtained many orders with advantages such as low labor costs and no additional tariffs on exports to the US. The level of operating income and net profit has increased rapidly, making it the company's most important overseas production base, which has also helped the company effectively cope with international trade frictions. The revenue of Cambodia Aitao and Cambodia Ryder accounted for 19.34% and 19.14% of the company's revenue in 2021, respectively. 3) In the sales process, the company's subsidiaries in the US, Shanghai, and Hong Kong are respectively responsible for overseas marketing, brand operation and re-export trade, with exports as the main focus, forming a relatively complete sales system for domestic and foreign markets.
Profit forecast and investment suggestions: Considering that the company is a leading enterprise for pet leashes and is actively developing segments such as pet snacks, etc., the global R&D and marketing layout is at the forefront of the industry, and the customer structure is excellent and the stickiness is high. It is expected that revenue for 22-24 will be 13.32/15.60/2,157 billion yuan, and Guimu's net profit is 2.24/2.70/410 million yuan, corresponding to the target price range of 50-60 yuan.
Risk warning: Risk of changes in the trade environment between China and the US; risk of increased market competition; risk of exchange rate fluctuations; management risk due to expansion of business scale; risk of overseas subsidiaries operating overseas; risk of a reduction in the scale of cooperation with China Pet Co., Ltd.; risk that fund-raising investment projects do not achieve expected returns; risk that independent brands have weak influence and are highly dependent on OEM sales.