Main points of investment
Event: the company issued the listing report of issuing shares to purchase assets and raising supporting funds. The total amount of funds raised by the company in this non-public offering was 39 million yuan. After deducting about 42000 yuan from related issuance expenses, the net raised funds was 38.958 million yuan. Obtain 69000 mu of agricultural development land use rights and related supporting assets held by Tianshan agriculture, and 16000 mu of grassland use rights held by Tianshan agriculture and animal husbandry.
The original frozen semen business remains sound. The company's main frozen semen business achieved revenue of 80 million yuan and gross profit of 40 million yuan in 2015. This year, the company launched a new goat frozen semen product, which is expected to be about 200,000 doses, bringing 3.4 million revenue to the company conservatively at 17 yuan per dose. On the whole, the company's frozen semen business this year is slightly higher than that of last year.
Frozen semen business starts bidding in the third quarter of each year, so we expect a big increase in the company's performance in the second half of the year. In the future, with the rebound of domestic dairy prices, the company's frozen semen business gross profit margin will also rise.
The acquisition of land provides a guarantee for the company's cattle and sheep in the future. The beef cattle company is actively building sales channels covering the whole country. The company currently has more than 20,000 Angus cattle in stock, and introduced 3,000, 7,000 and 10,000 Angus cattle respectively from 2013 to 2015. As the company's channel construction this year is slightly lower than expected, we lower our forecast for Angus beef cattle production this year, from 1500 to 1000, and there will be a substantial increase in the next two years. Therefore, we estimate that the number of columns in 2016-2018 will be 1, 000, 000. We believe that the land use rights obtained by the company provide a solid foundation for the future growth of more than 10,000 Angus cattle and ordinary beef cattle and sheep in the future. And with the company's beef and mutton products from Xinjiang to outside Xinjiang, profits will usher in a substantial increase.
The newly established subsidiary thickens the performance of the company. The company established a wholly-owned subsidiary Hutubi Tianshan Agriculture and Animal Husbandry Science and Technology Development Co., Ltd., based on the acquisition of 69000 mu of agricultural development land use rights and land-related supporting assets as well as some cash contributions. The project maintains the company's original planting business, and establishes a conversion fattening farm to carry out beef cattle fattening business. The company plans to build the project for 1 year, put into production for 2 years, reach production for 7 years, with an average annual profit of 11.5 million yuan.
Profit forecast and investment advice. We predict that the EPS of the company from 2016 to 2018 is 0.01,0.14,0.21 yuan respectively, and the corresponding dynamic PE is 1772 times, 119 times and 80 times respectively. We believe that the company's profitability will be greatly improved in the future with the launch of Angus beef and the rebound in domestic dairy prices.
We are optimistic about the development prospect of the company in the domestic high-end beef market and maintain the "overweight" rating.
Risk tips: beef cattle out of the column size or not up to expectations, beef cattle prices or a sharp decline, sales channel construction or not up to expectations, beef cattle import industry policy or change.
