Incident: Recently, the company held the “21-Year Path to Finding Germs to Unlock Chinese People's Good Health” Chinese bacteria conference, showcased a newly designed innovative probiotic terminal product, and unveiled three sub-brands, namely the probiotic brand Yishiyou, MBB, and Fujiangyuan Brand Director.

The company's three major brands of Chinese bacteria are positioned according to the needs of different groups of people and application scenarios of different probiotic products. Yishiyou is positioned as a more professional and inheritable probiotic product, and is committed to making it a leading brand in the probiotic industry in China; MBB is more segmented in terms of product positioning, efficacy positioning, groups and scenarios, and has online and offline multi-channel coverage. The key products include small gold bars, small silver bars, and two new probiotic products focusing on women and children; the layout of the post-probiotic industry is conducive to breaking through product dosage restrictions applicable to probiotics and providing the industry with more scenario-based solutions.

The edible probiotics sector continues to grow and has become the company's core business, a breakthrough in 24-year performance growth.

In 2023, the company's edible probiotic products business revenue was 190 million yuan, up 37.4% year on year, accounting for more than 60% of the company's revenue. Sales revenue of edible probiotic products surpassed compound food additives for the first time, making it the company's largest revenue share and the most profitable business segment.

This year, the company is focusing on the edible probiotic business as a breakthrough in performance growth: focusing on ToB, developing a wide range of customers by directly providing probiotic products to downstream companies or customizing probiotic terminal products for customers; ToC business channels, online business is mainly self-operated and outsourced distribution, and offline business is mainly based on establishing dealer operation systems with different channels. The company will also incubate some promising probiotic brands and marketing teams. For example, the company has invested in the participating company Chukemei to specialize in MBB probiotic products. Its experienced marketing team enhances consumers' attention and understanding of gut health and enhances the C-side operation efficiency of the product.

Investment advice: The company has the core technical advantages of probiotics, and has accumulated a number of high-quality and stable B-side customers to form a good demonstration effect. The C-side active multi-channel layout is expected to contribute more in the future, and at the same time implement equity incentives and cohesion, which is conducive to promoting the company's high-quality development. The company's revenue for 2024-2026 is estimated to be 4.4 billion yuan, 5.8 billion yuan, and 73 billion yuan for EPS, respectively. The corresponding valuation of the current stock price is 32, 24, and 18 times, respectively, maintaining a “buy” rating.

Risk warning: Increased industry competition, risk of stock price fluctuations in the secondary market, development of B-side probiotic customers falling short of expectations, compound food business falling short of expectations, food safety risks.