Main points of investment
Chinese Flavor and Flavor (3318.HK) is one of the leading enterprises in Chinese flavor and flavor industry. China Flavor and Fragrance Co., Ltd. is one of the leading enterprises in China's flavor and fragrance industry. the company provides one-stop service for R & D, manufacturing and sales of flavors and fragrances. The products are divided into tobacco flavor, food flavor and daily chemical flavor products.
Build a new production base in Dongguan and increase production capacity. The company is currently in the production base of Bolton Science and Technology Park in Shenzhen, with an annual production capacity of 2000 tons of tobacco flavor, 3000 tons of edible flavor and 2000 tons of daily chemical flavor. The company has built a new production base in Dongguan and expanded its production scale, which is expected to be put into operation in 2017.
Downstream mergers and acquisitions of electronic cigarette manufacturing enterprises. The company acquired all the shares of Kimree, an e-cigarette manufacturing company, at a total cost of 750 million yuan, and the company's product portfolio was further diversified. As an innovative electronic consumer product, the popularity of e-cigarette in China is still very low, and there is a lot of room for improvement. In addition, the atomization technology of e-cigarette can also be applied to some medical and health care fields, and it has great potential for future development.
Horizontal merger and acquisition of a series of tobacco flavor companies to enhance market share. Recently, the company announced the acquisition memorandum and plans to acquire three companies, namely, Shenzhen Huiji, Shenzhen Dahelong and Hainan Zhongdao. Once the acquisition is completed, the company's market share in tobacco flavor will increase from the current 15-18% to about 38%, and the company will further consolidate its leading position in the market.
Our view: the company's performance has grown steadily in the past few years, the scheduled company has increased its production capacity through the construction of new production bases, and the extension has rapidly increased its market share through upstream and downstream vertical acquisitions and horizontal mergers and acquisitions. The company is expected to usher in a period of rapid growth. In terms of valuation, the company's current share price is about 20 times the 2014 PE, which already includes market expectations for new capacity, and the current PB is about twice as high. Several mergers and acquisitions announced by the company are still in progress, and investors are advised to pay close attention to them.
Risk hint: Dongguan production base production progress is lower than expected, project acquisition is not as expected.