Fortune News, July 22 news, artificial meat stock BeyondMeat today rose about 10% to $194, the latest market capitalization of nearly 11.7 billion.

BeyondMeat was listed on Nasdaq on May 2, 2019, when IPO opened at $46, an 84% premium to its offering price of $25. Its shares closed up 163% at $65.75, the best IPO performance since the financial crisis. By the close of trading on July 19th, BeyondMeat (BYND) shares had reached $176.79, with a lot of stamina.

The American IPO market in 2019 is hot, in addition to Uber, SpaceX and other star unicorns, but also including the domestic well-known lucky, DouYu International Holdings Limited are also listed on the US stock market one after another. But these star companies, which raised nearly $100 billion, were overshadowed by BeyondMeat, an "unknown" artificial meat company, which led the way.

It may be more famous than you think.It is clear from BeyondMeat's public information that its individual investor list can be called star Yunji Inc, Microsoft Corp founder Bill Gates (Bill Gates), global male god Leonardo DiCaprio (Leonardo DiCaprio), Coca-Cola Company Group CFO Kathy Waller and Twitter's CFO Ned Segal.

BeyondMeat, which is favored by these investors, naturally has its unique features. The meat we usually use as food is made up of amino acids, fats, trace minerals, vitamins and water. According to Ethan Brown, founder of BeyondMeat, these things are not exclusive to animals, and the same elements can be found in plants.

Under the role of consumption upgrading, people are not simply satisfied with the pursuit of food taste and vision, health and environmental protection has also become one of the needs.

It is no accident that BeyondMeat is recognized by consumers. Its mode of production is very mild and more environmentally friendly. In its prospectus, the company claims to reduce greenhouse gas emissions by 90%, water consumption by 99%, land demand by 93% and energy demand by 46%. Health, environmental protection, humanitarianism, by catering to the current market demand side, BeyondMeat has been successfully listed, a blockbuster.

BeyongMeatThe story of

There is something different in the prospectus filed with the Securities and Exchange Commission (SEC), including a letter from founder Ethan Brown about his childhood on his own farm.

I have to say, such feelings are admirable, at least Bill Gates is willing to buy it. One of BeyondMeat's largest and earliest investors was Tyson Foods, a food giant with a market capitalization of nearly $30 billion, which held a 5 per cent stake in BeyondMeats in 2016 and later increased its stake to 6.52 per cent.

However, Tyson Food withdrew from the IPO earlier this year, and analysts believeIf earnings grow as expected, other investors may also seek to cash out, as ongoing analysis suggests that the stock may be a temporary trend rather than a long-term investment.

Room for sales growth of BeyondMeat

According to the prospectus, sales of BeyondMeat (BYND) increased nearly 3.8 times from 3.98 million pounds in 2016 to 15.24 million pounds in 20018. Analysts believe this is driven by changes in consumer preferences, with more people switching to healthier meat substitutes, such as vegetable meat, for health benefits and environmental protection after the millennium.

Between March 2016 and March 2019, annual sales of vegetable meat in the US rose 42 per cent to $888 million, compared with just 1 per cent for traditional meat, according to a recent Nielsen report.

This trend is expected to continue, with BYND expecting to increase trading volume by more than 39 million pounds over the next two years, driven by increased sales of fresh meat. Sales of frozen meat in BYND are expected to decline due to health benefits and improved quality, as sales of frozen foods in the US are expected to show negative compound annual growth of-1.2 per cent between 2016 and 2021, according to the report.

According to public financial data.BeyondMeat's revenue has grown rapidly in the past three years. It reached $87.934 million in 2018, a 1.7-fold increase over last year.

Market segment performance

从Snack channelLook, BeyondMeat sells its basic plant-based meat products through its snack partners, including Albertson, Kroger, Wigmans and Wholefoods. According to public financial reports, retail sales accounted for 58% of total revenue in 2018.

Analysts expect BeyondMeat's revenue to grow more than 3.6-fold over the next two years to reach about $185 million by 2020, driven by increased brand awareness, rising sales and a combination of domestic and international expansion.

从Restaurant Restaurant (Renee F)In its prospectus, the company disclosed that it sells its flagship products "Beyond Burger" and "Beyond Sausage" through about 12000 restaurants and food service outlets in the United States. Revenue in this category increased from $3.84 million in 2016 to $37.16 million in 2018. In 2018, Ripf's sales accounted for 42% of total revenue.

Without other uncontrollable risks, the division's revenue is expected to grow more than 4.6-fold over the next two years, reaching $173 million by 2020.

Deconstruction of BYND operating profit

BeyondMeat since its inception. There have been operating losses, but operating profit margins have continued to improve due to the rise in the revenue base.

Although it shows a loss in the performance of net profitThe net loss in the last quarter was $6.6 million, compared with a net loss of $5.7 million in the same period last year.On a per-share basis, Beyond Meat posted a quarterly loss of 95 cents, compared with 98 cents a year earlier. Excluding some one-time items (not in accordance with GAAP), the company's adjusted loss per share was 14 cents, compared with 13 cents a year earlier.

Then the performance of the market shows that investors are not unduly worried about paper losses, probably because the company has been committed to R & D and innovation, spending as much as $9.587 million on Renewd in 2018.By the end of 2018, its prospectus showed that it had 355 full-time employees, including 233 operators, 44 innovative R & D personnel, 35 sales and marketing staff and 11 financial staff.

IPO has long known that BYND is expected to break even in 2019 and nearly improve its profitability in 2020, mainly due to the rapid growth of the top line, fixed costs are absorbed by the steady growth of sales, and the operating profit margin is expected to be 0% in 2019 and 1.2% in 2020, which will be significantly different from-31.8% in 2018.

A problem worthy of attention.

Taking a closer look at BYND's prospectus, it is not hard to find that, unlike real vegetarian hamburger companies, BYND is promoting their products as meat substitutes, not just vegetarian burgers. As a result, the following problems arise:

The taste is still different from the real meat.It is reported that some people will buy from the supermarket BYND vegetarian meat for simple cooking, after a detailed comparison, said that "the first bite of the feeling is difficult to distinguish, but when you try the second bite, you will find that there is a significant difference from the real meat quality." This may lead to continued investment that does not get the expected return because it is not really recognized by the carnivorous community.

There is no moat.In fact, there are several alternatives to animal meat in current science, and these methods will be continuously improved and applied to the market over time. Both BYND and its main competitor, Impossible Foods, have adopted a plant-based approach, which is not yet listed, but Li Ka-shing, Temasek and others have raised $300m for the latter, more than six times the size of BYND before its listing.

But so far, no company has made a perfect substitute for animal meat, and once there is a perfect alternative, everyone will follow suit, because there is no obstacle to copy. Analysts have been searching the US patent registration website for a long time, and BYND has only one patent and 20 pending patents.

After all, what BeyondMeat does is optimize the combination of peas, beets and other vegetables, not modify the plant's genes, which greatly increases the likelihood of replicas, even by later replicators.

Fierce competition.Temporary stock market outbursts (or can last for a while, because investors usually have irrational attributes) are just the calm before the storm, and big players have come in with their products.

TSN sold its 6.5 per cent stake in BYND through IPO, in part because TSN is also looking to develop its own line of alternative protein products.

It is reported that TSN has launched its first product: a meat product that combines animal and plant proteins. And other big players around the world, such as OTCPK:NSRGY, have also revealed that they are developing related products.

In fact, these large competitors are likely to catch up from behind.First, they already have a strong and mature distribution network, including decades-long partnerships with big companies such as McDonald's Corp.

Although BYND has done equally well in the distribution network, it is far from comparable to TSN and Nestl é.

Second, the advantage of a large number of players lies in the lower cost of capital.This means that even if production costs are similar, BYND will have to pay its cost of capital for products priced higher than TSN.

Currently, BYND's gross profit margin is 20%, while TSN's gross profit margin is 12%. However, higher prices drive higher profit margins. This is shown in the following figure.

According to the US Meat Price Survey, a pound of "Beyond Burger" costs almost twice as much as grain-fed beef ($6.99 / lb) and regular beef ($4.99 / lb).

In order for BYND to win more market share, the price of its hamburger must be close to the price of conventional or even organic beef in order to have a competitive advantage. But based on the price of organic beef, BYND's gross margin would fall to-37%.

This means that to be competitive, BYND needs to raise costs by 37 per cent as much as organic beef and up to 55 per cent as much as regular beef.

Cost reduction can be achieved through investment in research and development and technological progress, but this cannot be achieved overnight and may take years.

ValuationAnalysis

You don't need a lot of professional knowledge to know that the price of $170a share is expensive, but IPO already knows that it wants to restore a reasonable market price through DCF.

As shown in the table below, assuming a reasonable share price of $150, sales must reach $22 billion by 2030 and the gross profit margin should be higher than that of competitors. WACC is assumed to be 10% here.

In terms of multiplesAssuming a fair EV/EBITDA multiple of 20, EBITDA should climb to $770 million by 2025 to justify the current stock price of $770 million.

But keep in mind that even Nestl é currently does not have a multiple of 20. It is also a very radical goal to reach an EBITDA of $770 million within six years. Only theoretical deduction is supported here.

Judging from the current priceStill assume that EV/EBITDA is 20 times, 8 years to reach the target income level, EBITDA profit margin of 15%. In this case, income needs to grow by 56% a year for the next eight years to prove that current market prices are reasonable.

Even if other multiples, profit margins and years are assumed. BYND's revenue also needs to reach a rate of 40% to 70% a year within 6-10 years.

Conjecture about BYND

So is it possible that BYND is just a niche player in the market? IPO has long thought that this might be a good strategy because it ensures that BYND will remain profitable in relatively limited competition.

However, the market for meat substitution is too small. According to the data survey, it is estimated that the global meat replacement market will only reach 6.4 billion US dollars in 2023, even lower than the current market capitalization of BYND.

But some bank analysts predict that the market will rise by 100 billion to 140 billion by 2030. This data is for reference only.