Investment highlights
For the first time, Yuanfei Pet (001222) was given an outperforming industry rating. The target price was 34.00 yuan, corresponding to 23 times P/E in 2023. The company is a leader in pet leashes, has a dual track layout for pet products and food, and has broad room for growth. The reasons are as follows:
The global pet industry is booming, nurturing leading domestic racetrack manufacturers. ① Industry Overview: The global pet industry has a large space and steady growth. The mature European and American markets occupy a large share. It is Yuanfei Pet's main export destination; China's economy, population structure, pet demand, and policies have all driven the pet industry into a period of rapid development. ② Market segmentation: Pet breeding in Europe and the US is showing a trend of quality and personification. Traction tools in pet products derive fashion attributes from practical attributes, which is expected to drive an increase in average pet ownership; snacks, etc. in pet food benefit from rapid growth in demand for interactivity and fun.
③ Competitive pattern: After years of development in the domestic pet products manufacturing industry, a number of innovative and high-quality product suppliers have emerged, occupying a leading position in the segmented global industry chain.
Core competitiveness: ① Product side: Efficient product design and industrialization capabilities. The company sees changes in consumer demand, achieves efficient product design and industrialization, attracts rich and rapid iteration of product SKUs, and leads pet fashion trends. ② Production side: Quality and cost go hand in hand. The quality management system covers all aspects, the quality has been certified internationally, and the cost control is excellent. ③ Sales side: Long-term deep cultivation of high-quality customer resources, stable and healthy customer structure. The company's customers are high-quality and diverse, covering leading international pet chains, supermarket chains and e-commerce platforms. At the same time, stickiness is high, and the revenue contribution of the top five major customers is stable. ④ Global layout to expand comparative advantages. The “Zhejiang Pingyang+Cambodia” dual production and processing base and global R&D, production and marketing layout have comparative advantages in terms of tariffs and costs.
Driving forces for growth: ① Capacity expansion: The company's IPO fundraising project is expected to ease production capacity bottlenecks, while increasing self-production ratio and expanding product profit margins. At the same time, the construction of intelligent warehousing and logistics centers is expected to reduce costs and increase efficiency. ② Customer development: The company continuously exploits existing customer resources to achieve rapid growth with leading customers, while actively developing new customers and contributing incremental revenue. ③ PRIVATE BRANDS:
The company's three private brands have good quality and growth potential, and are gaining strength through multiple online and offline channels, which is expected to open up space for medium- to long-term growth.
What's the biggest difference between us and the market? We believe that the market underestimates the broad growth space brought by the company's deep cultivation of pet products and food tracks, and the competitive advantage of the company's global R&D, production and marketing layout.
Potential catalyst: In the context of capacity expansion, orders for pet leashes, supplies, snacks, etc. are being placed.
Profit forecasting and valuation
We expect the company's EPS to be 1.28 yuan and 1.48 yuan respectively in 2022-2023, and a CAGR of 22%.
The current stock price corresponds to 22/19 times P/E of 2022/23, respectively. The outperforming industry was given a rating of 34 yuan and a target price of 34 yuan, corresponding to 27/23 times P/E in 2022/23, respectively, with room for 24% upward.
risks
The price of raw materials rises, the risk of additional tariffs, the risk of loss of core customers, and the risk of exchange rate fluctuations.