Core ideas:
Leading company in flavor and fragrance industry
Founded in 1991, the company is the first batch of flavors and fragrances production and sales enterprises in China. the company's main products include edible flavors, daily flavors and tobacco flavors, mainly serving domestic well-known consumer goods and tobacco brands. work with brands to develop new flavors and aromas. The company integrates independent research and development of formulations, production and sales, and equipped with a perfect after-sales service system, is one of the leading enterprises in China's flavor and flavor industry.
Chinese flavors and fragrances continue to be stable and grow at a high speed. The growth power of e-cigarettes shows that in the past four years, the company's gross profit margin has remained stable at more than 45%, the net profit rate has been maintained at more than 9%, and the profitability has improved steadily. As of the first half of 2016, the company's operating income reached 400 million yuan, an increase of 17% over the same period last year. In terms of annual profits, the profit of the first half of the year increased by 39.1% over the same period last year. This is closely related to the development of the e-cigarette market with high gross margin. E-cigarettes accounted for 9% of the main business revenue in the first half of the year, and it is expected to become a new growth point for the company in the future.
The demand of flavor and fragrance industry is stable, and the market space is large.
The flavor and fragrance industry has the following characteristics:
(1) the production process of flavors and fragrances is fine and the technical and technological requirements are high.
(2) complex research and development of flavors and fragrances, high technical barriers and fierce international competition
The production process of essence, such as raw material extraction and blending, is fine. The production and research of flavor and fragrance products is complex, and the technical barrier is high. China's unique resource advantages and the great potential of the flavor and fragrance market have attracted many international well-known flavor and fragrance manufacturers to join, resulting in the domestic flavor and fragrance market has gradually formed an international competition pattern. Domestic flavor and fragrance enterprises will directly face the fierce international competition.
(3) Flavor and fragrance products market: broad space
According to the survey data of Leffingwell, the global sales revenue of the flavor and fragrance industry is expected to reach 26.5 billion US dollars in 2016. China's sales reached 36.5 billion yuan in 2015, accounting for about 20% of the global market, with an average annual growth rate of more than 10% in recent years. It is expected that it will continue to grow steadily in the future.
Broaden the industrial chain and enhance competitiveness
(1) to acquire Jirui Technology Co., Ltd. and lay out the e-cigarette market.
In January 2016, the company acquired Geary, the world's second largest e-cigarette manufacturer, for 750 million yuan.
(2) acquire four tobacco flavor companies to further increase market share
In July 2016, the company completed the acquisition of four tobacco flavor companies, namely, Shenzhen Huiji, Shenzhen Dahelong, Guangzhou Fangyuan and Hainan Zhongnan Island.
Performance forecast: we forecast earnings per share of 0.12 yuan, 0.13 yuan and 0.14 yuan (RMB) for 16-18 years, covering "buy" for the first time. We are optimistic about the integration trend of the company in the flavor and flavor industry. The current closing price of 2.37 (HK $) corresponds to a price-to-earnings ratio of about 15.8 times 2016.
In July 2016, the company completed the acquisition of four tobacco flavor companies, namely, Shenzhen Huiji, Shenzhen Dahelong, Guangzhou Fangyuan and Hainan Zhongnan Island.
Risk tips: the erosion of Zhou's Black Duck brand by counterfeit products and stores; the erosion of Zhou's Black Duck brand by food hygiene problems; risk tips: 1, exchange rate impact risk; 2, and A-share investment environment difference risk; 3, macroeconomic decline exceeding expectations; 4, product price fluctuations