On December 27, 2023, Lotus Health announced the signing of a letter of intent, the extension and termination of some fund-raising projects, the appointment of a CEO, and the adjustment of senior management positions.
Key points of investment
It is proposed to acquire no less than 50% of Weizhili's shares to accelerate the pace of overseas expansion
The company plans to acquire no less than 50% of the shares of the Malaysian MSG manufacturer Weizhili (Malaysian natural person Lu Xiujin holds 49% of the shares +Malaysian natural person Ji Shuzhen holds 51% of the shares). This target was the company's dealer in the Malaysian market. According to the announcement, the target revenue for the end of January-August 2023 was 215 million yuan (3% decrease), and net profit was 18.91 million yuan (65% increase). We believe this move will speed up the company's overseas layout and help expand the company's brand influence.
The organizational structure was adjusted to clarify the division of labor, and the fund-raising project was adjusted to improve efficiency. The company announced the appointment of Mr. Li Bin as the company's CEO, and the proposed adjustment of Cao Jiasheng as senior vice president and chief technology officer; proposed to adjust Li Tao as senior vice president and chief digital marketing officer; proposed to adjust Luo Xianhui as chief operating officer; proposed to adjust Mei Shenlin as chief sales officer; proposed to adjust Li Haifeng as chief international marketing officer; proposed to adjust Yu Teng as chief financial officer; proposed to adjust Wang Jin as chief talent officer; proposed to adjust Li Tian as chief manufacturing officer. The organizational structure adjustment helps the company to clarify the division of labor responsibilities and further standardize the company's operations. In addition, the names of the fund-raising projects postponed by the company: (1) advanced technology transformation project with an annual output of 100,000 tons of commercial MSG and 50,000 tons of compound seasoning; (2) wheat flour series products project. The scheduled usage period for the advanced technology transformation project with an annual output of 100,000 tons of commercial MSG and 50,000 tons of compound seasoning was extended from December 31, 2023 to June 30, 2024, and the scheduled usage period for the wheat flour series products project was extended from December 31, 2023 to December 31, 2024. The names of the fund-raising projects the company plans to terminate: (1) bio-fermented products project; (2) supporting bio-fermented products project. This move helps the company further integrate resource efficiency, focus on the main business, and stabilize the basic market.
Profit forecasting
We are optimistic that since the majority shareholders have joined the company, they will continue to carry out internal reforms, resolve the burden of history, go to battle lightly, and actively develop a second growth curve. EPS is expected to be 0.07/0.12/0.19 yuan in 2023-2025, and the current stock price is 81/47/30 times PE, respectively, maintaining a “buy” investment rating.
Risk warning
Macroeconomic downside risks, food safety risks, main business growth falling short of expectations, and risk of cost increases.