Company profile: (1) Shanghai Merlin is mainly engaged in the production and manufacture of meat and meat products, snack food and integrated food distribution. The company listed in A shares in 1997, highly focused on the development of the main meat industry, the steady development of leisure food business, canned Merlin lunch meat, Essen Su eat cold fresh meat, Guanshengyuan honey, white rabbit milk sugar, Lianhao steak and other products leading the industry. (2) the actual control of the company is Bright Food Group, with a shareholding of 37.79%. The company relies on the resource advantage of the group, and the synergy is obvious.
The scale of income continues to expand and profits continue to grow. (1) revenue and net profit continued to grow: revenue increased from 10.562 billion yuan in 2014 to 22.179 billion yuan in 2018, with CAGR of 20.38%; net profit of home ownership increased from 46 million yuan in 2014 to 306 million yuan in 2018, with CAGR of 60.49%. (2) the cost during the company is effectively controlled, and the superimposed scale effect is highlighted. The rate of expenses during the period has declined steadily from 12.77% in 2014 to 9.54% of 2019H1. (3) from the point of view of products, the company has a perfect layout of the whole industry chain of the meat industry, the main products are beef and mutton, chilled pork, pig breeding, canned food, comprehensive food and so on. Among them, beef and mutton business increased significantly due to the acquisition of New Zealand silver ferns, chilled pork business shrank slightly, pig breeding business fluctuated growth, canned and integrated food business developed steadily.
Focus on the main meat industry and steadily develop snack food: (1) Beef and mutton business: China, as the largest developing country, has a strong demand for beef and mutton and insufficient supply, and the gap between supply and demand continues to push up prices. From the perspective of per capita consumption and meat consumption structure, there is still room for upward demand for beef in the future. The company has acquired Silver Fern Farm in New Zealand since 2016, with an income of nearly 12 billion yuan. The two sides continue to integrate high-quality resources, and the synergy effect is gradually emerging. (2) Pork business: the company has successively acquired Su Meat, Huai'an Su Shi, Guangming Pig, set up Jiangsu Meilin Animal Husbandry, and strengthened upstream pig breeding investment. With the advantages of brand, channel and cold chain technology, the company's chilled pork continues to consolidate its dominant position in the Yangtze River Delta region. By mid-2019, the company has a breeding capacity of 1 million pigs and a slaughtering capacity of nearly 1.9 million. In the second half of 2019, under the background of pig supply shortage, pig prices entered the upward cycle, and the profits of the company's pig farming and chilled meat business are expected to rise. (3) canned food business: the scale concentration of China's meat canned market is both low, and the domestic market has a lot of room for growth. With the advantages of brand, channel and production capacity, Meilin canned meat ranks first in China's meat canning industry, with an income of 14.21 yuan in 2018, a market share of 66.7% and a stable gross profit margin of about 30%. Guanshengyuan, White Rabbit and other well-known brands of snack food gross profit margin continued to rise to 36.70%, through new product development, new marketing, the old brand further ushered in a new drive.
Investment advice: we expect the company's operating income from 2019 to 2020 to be 226.78 yuan and 23.667 billion yuan respectively, an increase of 2.25% and 4.36% respectively over the same period last year, and the net profit of returning home is 3.63 yuan and 411 million yuan respectively, an increase of 18.66% and 13.07% respectively over the same period last year, corresponding to a PE of 23.9 and 21.1x.
Risk hint: overseas business coordination is not as expected, plague risk and food safety risk.