The company is the first national brand in the subdivision of chicken essence and chicken powder condiment industry. although the prosperity of the catering industry has fluctuated greatly in the past three years, the company is operating steadily. In recent years, the plan of doubling income and the upgrading of consumption have led to the rapid expansion of China's condiment market. Chicken essence and chicken powder are excellent substitutes for monosodium glutamate, and the market is mainly monopolized by wife Le (Nestle) and Jiale (Unilever), both of which have a market share of 70%. Jialong's market position is second only to missus and Jiale, with a market share of about 7%, ranking third, and chicken powder, with a market share of about 19%, ranking second. Since the company went public for three years, without capacity expansion, it has maintained a stable revenue and a steady increase in gross profit margin. Although the net profit has declined, it is mainly to digest the new production capacity in the future and increase investment in marketing ahead of time.
With the commissioning of the company's fund-raising projects, the capacity bottleneck has been completely solved, and the performance growth has returned to the inflection point. The degree of automation and health safety of the company's new production capacity has reached the international advanced level, and the total production capacity has at least doubled since it was put into production in July 2013. The company adheres to the product positioning of "mid-range price, medium-and high-grade quality". Chicken powder products are 30% to 45% lower than wife Le and Jiale, and chicken essence products are 16% lower than Mrs. Le. The price advantage of the company's products, combined with continuous marketing investment in recent years, the new production capacity reflected in the sales side of the volume may be faster than expected.
The company has a wide range of products and invests in Guangzhou Jialong sauce production base to enter the field of "whole kitchen" solution. At present, the company has formed more than 30 kinds of products in soy sauce, chicken powder, chicken essence, chicken juice and other five categories. After the sauce project is put into production, more than 10 categories of products can be added, which can effectively promote the vertical and horizontal development of the company's industrial chain, seize more market share and improve the comprehensive gross profit margin.
Earnings forecasts and ratings. We believe that the inflection point of the company's performance growth is now present, and the new production capacity will match the lower product prices and the continuous marketing investment in recent years, and the sales side will perform better than expected. The company's EPS for 13-15 years is expected to be 0.16,0.20,0.27 yuan respectively, corresponding to the current stock price PE of 39.0,31.1 and 23.3 times. Although the valuation is not cheap enough, considering that there is an inflection point in the company's performance growth and there is room for imagination in mergers and acquisitions (the asset-liability ratio is only 3%, and the idle funds raised by the China News is 405 million), the overweight rating is given for the first time, and it is recommended to buy at a bargain.
Risk tips: increased competition in the industry, a sharp rise in the price of raw materials, the marketing effect is not up to expectations, customer expansion is blocked, resulting in insufficient utilization of new capacity
