The world's leading producer of vegetable protein, the soy protein deep processing industry chain is complete. The company's main business is R&D, production and sales of soy protein series products. It is a leading global manufacturer of professional vegetable protein. The company focuses on the soy protein industry, integrating Israel's Sobao's world-leading production technology, R&D capabilities, and Wandefu's industry accumulation and continuous innovation capabilities for more than 20 years. It has a production line for a full range of products from soybean procurement, low-temperature leaching and isolated soy protein, non-functional concentrated protein, functional concentrated protein, and structured protein (tissue protein, brushed protein). It is one of the few companies in the industry with the most complete soy protein deep processing industry chain and the richest range of products. In the 19-22 period, the company's revenue CAGR = 20.2%, and net profit CAGR = 36.6%. In addition, the company expects revenue of 16.96-1,767 billion yuan in 2023 (down 8.16% to 4.32% year on year), and net profit to mother of 1.61 to 172 million yuan (down 4.18% year on year to 2.37%).
The soy protein industry has broad prospects, and the company's products have high brand popularity at home and abroad. According to the company's prospectus, China has always been the world's largest consumer of soybeans. From 2010/11 to 2020/21, global soybean consumption increased from 253 million tons to 363 million tons, an average annual increase of 3.28%. According to the company's prospectus, citing the “OECD-FAO Agricultural Outlook Report (2021-2030)”, China's soybean consumption in 2021 was 117 million tons, accounting for 32% of global soybean consumption. Currently, the amount of soybeans used in soybean protein production in China is increasing year by year. In 2019, China produced about 18.1 million tons of soybeans, of which about 2.4 million tons were used for soy protein processing. By 2024, the amount of soybeans used in soybean protein production and processing in China will reach 3.7344 million tons. The application of soy protein mainly covers industries such as meat products, snack food, food, health products and plant-based meat. We believe that as people's quality of life improves, more attention is paid to the nutrition and balance of the diet. As a source of high-quality vegetable protein, soy protein has broad future prospects.
The company's products have high brand awareness and reputation at home and abroad. According to the company's prospectus, citing research from the Soy Protein Branch of the China Chamber of Commerce for Import and Export of Food, Livestock, and Livestock ([2023]), the annual sales scale of domestic soy protein manufacturers is about 650,000 tons, accounting for about 45% and 55% of domestic and export sales, respectively. The concentration of the soy protein industry is relatively high - Linyi Shansong Biological Products Co., Ltd., Shandong Yuwang Ecological Food Co., Ltd., Shandong Yuxin Biotechnology Co., Ltd., Shandong Jiahua Biotechnology Co., Ltd. and their producers account for about 60% of the total market share.
Furthermore, the sales scale of the company's soy protein accounts for about 10% of the sales scale of domestic soy protein manufacturers, and the company is a major enterprise in the soy protein industry in China.
Downstream customers are of excellent quality, and overseas & direct sales continue to grow rapidly. With nearly 20 years of experience in professional R&D, production technology, and market development, the company has formed a product line from low-end to high-end, covering all types of soy protein products. It is one of the few enterprises in the world that have mastered advanced soy protein R&D and production technology.
The company's main customer groups for soy protein-related products include meat products manufacturers (such as Shuanghui Development), snack food manufacturers (such as Yanjin Shop), frozen food manufacturers (such as Sanquan Foods), pharmaceutical companies (such as Federal Pharmaceuticals), etc.; the company's main customer groups for non-genetically modified soybean oil include catering companies (such as Haidilao) and edible oil deep processing companies (such as Luhua Group). Furthermore, the company has become a global strategic partner with Bunge of the United States, which is one of the four largest food merchants in the world, and is committed to the global layout of plant-based meat and functional food industries.
The company's mainland China business revenue in '22 accounted for 64.9% of total revenue, CAGR = 16.04% in the 19-22 period, foreign business revenue accounted for 34.7% of total revenue, and CAGR = 29.94% in the 19-22 period.
The company's sales were mainly based on the direct sales model, and the sales model accounted for 60.96%/61.52%/65.33%/67.15% respectively during the 20-23H1 period, and the direct sales model continued to increase. Furthermore, during the 20-23H1 period, the sales share of the company's distribution model was 39.04%/38.48%/34.67%/32.85%, respectively. The company continued to sort out dealer customers. The number of sales customers during the 20-23H1 period was 426/399/369/ 281, respectively.
Profit forecasts and investment recommendations.
The revenue CAGR for the protein isolate business in 19-22 was 12.37%, and 23H1 fell 6.18% year on year. Therefore, based on this, a revenue growth rate of -6.0%/15.0%/10.0% for 23-25 was given. On the gross margin side, the average gross margin for 19-22 was 12.42%, and gross margin fell 3.42pct year-on-year in the first half of '23. Referring to this, as well as scale effects, the forecast for this business is 10.00%/11.00%/12.00% for 23-25.
The non-genetically modified pure soybean oil business revenue CAGR = 23.10% for 19-22, and 23H1 fell 17.10% year-on-year. Therefore, based on this, a revenue growth rate of -20.0%/25.0%/20.0% for 23-25 was given. On the gross margin side, the average gross margin for 19-22 was 8.56%, and gross margin fell 6.45pct year-on-year in the first half of '23. Referring to this, as well as scale effects, the forecast for this business is 3.00%/4.00%/5.00% for 23-25.
The soybean protein business's revenue CAGR = 25.99% for 19-22, and 23H1 increased 23.39% year-on-year. Therefore, based on this, we forecast a revenue growth rate of 25.0%/25.0%/25.0% for 23-25. On the gross margin side, the average gross margin for 19-22 was 19.01%, and gross margin increased 0.97pct year-on-year in the first half of '23. Referring to this, as well as the scale effect, the forecast for this business is 20.50%/21.00%/22.00% for 23-25.
The tissue protein business's revenue CAGR = 20.49% in 19-22, and 23H1 declined 22.75% year over year. Therefore, based on this, a revenue growth rate of -20.0%/20.0%/15.0% for 23-25 was given. On the gross margin side, the average gross margin for 19-22 was 27.09%, and the gross margin increased by 7.01pct year-on-year in the first half of '23. Referring to this, and the scale effect, the forecast for this business is 28.00%/29.00%/30.00% for 23-25.
Other revenue and other businesses account for a relatively low share, so they are all forecasted for a revenue growth rate of 5.0%/5.0%/5.0% for 23-25. On the gross margin side, the average gross margin of other revenue in 19-22 was 5.53%, and the average gross margin of other businesses was 58.74%. Considering the relatively low share of the two businesses, a gross margin forecast of 5.00%/5.00%/5.00% of other revenue for 23-25, and a gross margin forecast of 50.00%/50.00%/50.00% for other businesses were given, respectively.
We expect the company's revenue for 2023-2025 to be 1,734/2,393 billion yuan, net profit to mother of 1.63/1.94/234 billion yuan, and corresponding EPS of 0.85/1.01/1.22 yuan/share, respectively. Based on comparable company valuation conditions, the company was given a PE (2024E) valuation range of 20-25 times, corresponding to a reasonable value range of 20.20-25.25 yuan/share. For the first time, we covered and gave a “superior to the market” rating.
Risk warning. (1) Food safety risks, (2) downstream demand falls short of expectations, (3) market competition intensifies, (4) new products, new channels, and new market expansion fall short of expectations, and (5) fluctuations in upstream raw material cost prices and cost investment.