The competition in the industry shows a situation of three-level differentiation, and the production capacity and output have increased synchronously in the past five years. China's chicken essence and chicken powder production enterprises can be divided into three categories: first, foreign-funded enterprises such as Nestl é, Unilever and other brands; second, large local producers represented by Guangdong Jialong and Sichuan Jingong flavor industry. Third, low-end products, low prices guerrilla in the market around the small and medium-sized chicken essence, chicken powder production enterprises. According to the estimates of Japan Weizhisu Company, the total demand for monosodium glutamate in the global market in 2013 is about 2.93 million tons (of which the Chinese market is 1.55 million tons). The production capacity of China's monosodium glutamate industry is about 2.62 million tons, and the actual output is about 1.57 million tons.

The consumption proportion of chicken essence and chicken powder is gradually increasing, and the substitute space for household consumption is chicken essence and chicken powder, which are compound seasoning and freshening agents, and their freshness is 1.5 times as much as that of monosodium glutamate. In recent years, the proportion of chicken essence and chicken powder in household consumption has increased significantly. In first-tier cities, the ratio of household consumption of monosodium glutamate and chicken powder has climbed from 1:9 in 2008 to 4.55. The most important channels for chicken essence and chicken powder are the catering industry and household consumption, which account for 60% and 32% respectively, with the remaining 8% for food manufacturing. Due to the large use of freshness enhancers in catering and food processing industry, low-cost monosodium glutamate is still the first choice, so the overall consumption proportion of chicken essence, chicken powder and monosodium glutamate in China is still low. According to a survey conducted by the China seasoning Association, about 80% of consumers in economically developed areas agree with the health and nutrition of chicken essence and chicken powder products. We believe that as the catering and food processing industries will always implement the "low-cost" strategy, the steady growth point of the chicken essence and chicken powder industry in the future is likely to be the field of household consumption.

With the combination of capacity release and industry trends, the company is at a critical point of strategic transformation. The "20,000 tons of chicken essence and chicken powder production base construction project" proposed in the company's prospectus has been completed and put into production in the third quarter of 2013, and is currently running smoothly. The new workshop consists of 10 production lines, including 5 producing chicken essence, 4 producing chicken powder and 1 producing ketchup (self-funded investment). This is also the main reason for the postponement of the company's fund-raising project and an additional investment of 60 million yuan, which fully reflects the company's idea of doing a good job in products. Automated production lines can not only at least double the company's production capacity, but also significantly expand the company's product line. the release of production capacity to comply with the recovery of the industry is the main reason why we are optimistic about the company's performance growth.

The company's performance is expected to grow at a high speed, giving "buy" rating chicken essence, chicken powder with good fresh effect and healthy ingredients, the development layout of surrounding products is also improving, and the future trend is to gradually replace monosodium glutamate into the kitchens of the people. With the catering industry bottoming out, the industry is expected to begin to recover in the second half of the year. It is estimated that the EPS from 2014 to 2016 will be 0.38, 0.51 and 0.67, respectively, and the PE of the previous share price will be 30.92,23.32,17.79, respectively, giving a "buy" rating for the first time.

Risk hints: a sharp rise in raw material prices, a slowdown in industry growth, lower-than-expected sales and systemic risks in the secondary market may adversely affect stock prices.