Hairong cold chain: leading commercial cold chain equipment. Hairong Cold Chain specializes in the R&D, production, sales and service of commercial cold chain equipment. Its products include commercial refrigerated display cases, commercial refrigerated display cases, supermarket display cases, commercial intelligent vending machines, etc. Through continuous penetration into major customers such as Mengniu, Erie, Nestle, Unilever, Pepsi, Coca Cola, 711, Lawson, and Meijijia, the company's performance achieved rapid growth. In 2012-2022, revenue increased by 23.9% to 2.90 billion yuan, and net profit to mother increased by 34.1% to 290 million yuan.
The commercial cold chain equipment industry is growing steadily, and the industry pattern is relatively scattered. The light commercial refrigeration equipment industry has maintained steady growth in recent years, reaching 35.4 billion yuan in 2022, with a compound growth rate of 9.4% in 2018-2022.
Looking at a more detailed breakdown, the refrigeration display cabinet industry, to which the main products of the Hailong cold chain belong, accounts for about 47% of sales of light commercial refrigeration equipment (2022). In 2019 and before, sales generally maintained an increase of more than 10%, and the sales volume has increased slightly in the midst of fluctuations since 2020. In the future, with the release of demand in downstream low-temperature milk, quick-frozen food and other industries, the commercial cold chain industry is expected to achieve continuous steady growth. The commercial refrigeration equipment industry pattern is scattered. The commercial refrigeration business of leading companies in the industry, Hairong Cold Chain and Star Cold Chain have a revenue scale of about 3 billion dollars, and the commercial refrigeration business revenue scale of second-tier companies is between 15-20 billion yuan. In terms of sales volume, the sales market share of Hairong Cold Chain in the refrigeration display cabinet industry increased steadily from 8.1% in 2018 to 14.2% in 2022. The market share increased significantly, becoming the leading position in the industry.
The company's competitive advantage: flexible manufacturing meets customization needs, and the cooperation with major customers is stable. 1) The company has established a flexible production system with a complete product matrix to meet the customized and differentiated needs of customers.
At the same time, through an efficient management system, the company continues to improve production efficiency, and per capita profit generation is at the leading level in the industry. 2) The company's R&D investment is at a high level in the industry, has accumulated rich experience in product development, built a differentiated advantage in the context of intelligent and digitized refrigeration equipment, and effectively guaranteed the quality of the company's products. 3) The company continues to develop customers and has established long-term and stable cooperative relationships with leading companies in various downstream industries such as Unilever, Nestle, Erie, Mengniu, Pepsi, and Nongfu Spring, and is rich in high-quality customer resources. 4) In the future, the company is expected to use the scale advantages and brand effects of leading companies to develop new domestic and foreign customers more efficiently, and use the advantages of customer resources to promote categories that account for a relatively low proportion, such as refrigeration.
Profit prediction and valuation: The commercial cold chain industry is expected to continue to grow steadily in the future. As an industry leader, Hairong Cold Chain is expected to continue to develop domestic and foreign customers and develop low-share potential categories such as refrigeration with R&D, production and scale advantages and brand effects. The company's revenue for 2023-2025 is expected to be 32.2/37.5/4.26 billion yuan, up 10.8%/16.5%/13.6% year on year; net profit to mother is 4.2/50/ 580 million yuan, up 44.4%/19.3%/16.1% year on year; corresponding EPS is 1.09/1.30/1.51 yuan/share, and PE is 14/12/10x. Based on absolute valuation and relative valuation, we believe that the reasonable valuation range for the company's stock price is 17.47-19.33 yuan/share, and the market value range is 67.5-7.47 billion yuan, corresponding to the 2023 PE of 16.0-17.7 times. For the first time, it was covered and gave a “buy” rating.
Risk warning: industry competition intensifies; raw material prices fluctuate; industry demand recovery falls short of expectations.