Main points of investment:
The company has become the most important asset integration platform of Beijing Food Group. In September 2016, Beijing Food Group became the actual controller of Pearl River Holdings, which in turn became the only listing platform of Beijing Food Group. Then Beijing Grain Group put its shares of Beijing Food into the listed company. In 2015, Beijing Cereal Group had an income of 24.32 billion yuan and a total profit of 510 million yuan, ranking among the forefront of domestic grain enterprises in terms of comprehensive competitive strength. Beijing Cereal shares had a simulated operating income of 5.04 billion yuan and a total profit of 200 million yuan in 15 years. In the future, the Group will undertake the policy guarantee function of "ensuring supply and stabilizing grain prices", and listed companies will focus on improving the profitability of the main business.
With the help of Beijing Grain Group, the listed companies have four major competitive advantages. First, the advantages of the industrial chain. Beijing Grain Group has formed a relatively complete industrial system around grain planting, procurement, warehousing, logistics, processing, sales and other links, which can share resources with listed companies. Second, the advantage of science and technology. The Group has set up Beijing Grain Science Research Institute. The third is the brand advantage. The group has many well-known brands such as "Ancient ship", "Lvbao", "Firebird" and "Ancient Coin". Ancient ship flour has won the first place in the country's comprehensive retail market share for seven years in a row, with a brand value of 8.87 billion yuan. Fourth, policy advantages. Beijing Grain Group is the only executive body of macro-control in Beijing grain and oil market, and it is also the grain and oil enterprise with the strongest strength and the best policy in Beijing, Tianjin and Hebei.
Grain and oil business has great profit potential to be tapped. In the past three years, Beijing Cereal shares have successively adjusted their industrial structure and product structure: transferring 14 trading companies with low profit margins, which are responsible for security functions, to Beijing Food Group; acquiring profitable subsidiaries of Zhejiang Xiaowang; and upgrading the product structure of oil business to deep processing, small varieties and multi-varieties. It is expected that as the increase in the production of small varieties of oil leads to the improvement of the company's capacity utilization (there are obvious economies of scale in the vegetable oil processing industry), the company's gross profit margin is expected to rise to 10%.
In addition, the company also has great potential in regional expansion, just from the Beijing market to Tianjin, Hebei revenue is expected to double, and may even expand to the north and even the national market, profit sustained rapid growth is expected.
The first battle of epitaxial expansion is successful, and the injection of mergers and acquisitions can be expected. Extension expansion is the established strategy of the 13th five-year Plan of Beijing Grain Group and Beijing Food Co., Ltd. Beijing Food Co., Ltd. acquired Zhejiang Little Prince Snack Food Company in 2015. The company's revenue for the year was 580 million yuan, up 11.8 percent from the same period last year, and its net profit was 70.844 million yuan, up 16.6 percent.
We believe that this is only the first step in the epitaxial expansion of Beijing Grain shares. In addition, compared with Cofco Group, which has a number of listed companies in An and H cities, Beijing Food Group currently has only one Pearl River Holdings, so Pearl River Holdings will undertake more important tasks of asset securitization of Beijing Food Group.
Investment advice. We expect the company to have an EPS0.07/0.29/0.36 of RMB 2016-2018, which is more than the average PE38 of the company in 2017. taking into account the strong strength of Beijing Food Group and the great potential for endogenous and epitaxial growth of listed companies, we give the company 48 times PE in 2017, with a target price of 14 yuan and a current price of 12.31 yuan, corresponding to 42 times PE in 2017.
Risk hint. If the shareholders' meeting fails, the company still has the risk of delisting, crude oil and oil prices rise too quickly, and the progress of subsequent mergers and acquisitions or asset injection is slow.