All dosage forms of nutritional health food are covered, forming a business model where contract production is the main focus and independent brands are supported.
Established in 2005, the company focuses on the production, R&D and sales of nutritional health food and specialty food, and strives to build a world-leading health food production plant. Since its development, the company has 2 major production areas and 8 digital intelligent production plants. It can produce more than 10 dosage forms, such as softgels, hard capsules, oral liquid, and gummies, and more than 4,000 products, and the products are exported to 70 countries including Europe and the United States. In addition to providing contract production services to brands, the company is actively developing its own brands. Currently, it has six major brands, including Baihekang and Hongyangshen, and has formed a two-wheel drive for the production of nutritional health foods. The company's revenue in 2023 was 881 million yuan, up 20.12% year on year, and net profit to mother was 169 million yuan, up 22.65% year on year. Of these, contract production accounted for 84% of revenue, and the rest are independent brands.
With the advent of the Yinfa economy and the “her” economy, the industry is booming, and leading producers are expected to benefit in the long term.
Currently, the aging of China's population continues to deepen. In 2023, the proportion of people aged 65 and over is 15.4%. According to UN forecasts, the share will rise to 18.2% and 30.1% in 2030 and 2050, forming an important support for demand-side growth in the nutritional health food industry. In addition to middle-aged and elderly people, health awareness among young people has increased, and “she” has shown remarkable economic performance. According to Magic Mirror Insight data, women account for 70% of health food consumption, and their share is showing an upward trend, driving rapid growth in segments such as nourishing health, oral beauty, and weight management. We believe that health product manufacturers improve industrial efficiency through specialized division of labor, which helps reduce costs and the threshold for brands to enter the industry. Brands at different stages of development have the core need to seek OEM development: 1) In the short term, emerging brands continue to emerge, with diverse demand for various dosage forms, directly benefiting leading foundry companies with full dosage form production capacity; 2) In the medium to long term, we expect long-term growth of Chinese nutritional health food brands. OK.
The company's R&D and customization capabilities rank among the highest in the industry. Under the volume of functional drinks, the influence of OEM is constantly increasing. Judging from its R&D and production capabilities, the company now has a 4,000+ formula database. For six consecutive years, the company's health food filing system has ranked first in the industry in terms of number of approvals. The company's R&D innovation capabilities and flexible production capacity with quick response in the industry have been widely recognized by customers. In terms of quality control, the company's comprehensive quality control and service system guarantees the high quality of products. In 2023, the company ranked second in the country in the health food supervision and sampling resistance list. In terms of dosage forms, the company set up an oral beauty circuit earlier. The revenue growth rate of functional drinks has exceeded 60% in the past three years, making them the most prominent dosage form. Cooperation with top brands such as five female doctors has also been a key driving force. It has also enhanced the company's foundry influence, attracted more small and medium-sized customers to establish cooperative relationships with the company, and is expected to continue to expand. In addition, the company's own brand business is mainly developed through offline pharmacy channels, using “product adaptability+high cost performance” to carry out differentiated marketing, increase pharmacy traffic, and form a mutually beneficial and win-win relationship with pharmacies.
Profit forecast and investment rating: We expect the company to achieve operating income of 930/10.34/1,140 billion yuan respectively in 2024-2026, with a year-on-year increase of 6.8%/11.1%/10.2%, net profit to mother of 1.80/1.98/218 million yuan, up 6.2%/10.0%/10.4% year-on-year, EPS of 2.81/3.09/3.41 yuan/share, and corresponding PE of 11X/10X/9X, respectively. The first coverage gave a “recommended” rating.
Risk warning: Risk of industry demand recovery falling short of expectations, increased risk of market competition, and food safety risks.