Adhere to the original intention of steady development, the industry under pressure to achieve rapid growth
Fengxiang started with the breeding business, and then gradually made the whole industry chain of white feather chicken thoroughly, transforming to deep processing.
In terms of commercial broiler production in 2019, Fengxiang is the second largest fully integrated white feather broiler producer in China. The company has a leading domestic market position and has a mature and expanding export market.
From 2016 to 2019, the company's revenue grew at an annual compound rate of 18.59%, and net profit at an annual compound growth rate of CAGR of 91.08%. Under general pressure in the industry, the company's 2020H1 achieved revenue of 1.903 billion, a year-on-year increase of 13.2%. Mainly due to the rapid growth of new retail business, sales revenue was 373 million, up 431.5% over the same period last year, and 532% and 289% respectively online and offline compared with the same period last year.
The overall market prospect is promising, and vertical integration firmly holds the advantage of quality.
At present, the level of per capita chicken consumption in China is relatively low. With the improvement of residents' consumption level and consumption structure, there is more room for industry improvement in the future. Compared with the enterprises that focus on a certain link to implement the company + farmer business model, through the control of the whole industry chain, integrated enterprises can create more value-added products through business sinking and hedge the negative impact caused by prices as much as possible. can better resist market risks, promote vertical integration has also become the future development trend of the industry. Since 2012, Fengxiang has established a business model integrating feed processing, breeding, broiler breeding, slaughtering and segmentation, and the production and sales of cooked poultry products, extending the industrial chain to the deep processing and sales of chicken products, gradually reducing the business share of chicken seedlings, greatly reducing the cyclical impact, and improving the ability to resist market risks, can better tap the value of chicken and enhance profitability.
Multi-market, all-channel efforts, deep ploughing the lower reaches of the value chain to seize the market
At present, the company is mainly based on B2B channels, but since 2016, the company has begun to seek a transition to C-end, and began to vigorously invest in sales fees in 2019 to expand C-end channels through online and offline convenience stores. C-end accounts for 20% of H1 in 2020, up from 2% in 2016, gradually transforming to the food industry. The company's new retail channel is mainly arranged through Liaocheng mode + excellent shape mode + online mode, and different channel sales models are adopted for different series of products. Under the dual advantages of R & D + brand, it is expected to drive the C-end channel to achieve rapid penetration.
Profit forecast: due to the serious damage to the chicken seedling business and the substantial investment in sales expenses this year, the company's net profit is expected to decline sharply this year, and there may be a significant recovery next year after the gradual divestiture of the chicken seedling business. It is estimated that in 2020-2022, the company will achieve revenue of 39.38x6409 million yuan, a year-on-year increase of 0% Universe 29% Universe 26%, a net profit of 1.69x541% Universe 902 million, and a year-on-year increase of-80% 221% Plus 67% pedigree, respectively, 0.12x0.39x0.64 yuan, covering for the first time, giving the company a 12-fold valuation in 2021, with a target price of 4.68 yuan (HK $5.55), and a "buy" rating.
Risk tips: macroeconomic downside risk, food safety risk, COVID-19 epidemic continuing risk, sales below expectations, high valuation risk.