The industry is booming and the pattern is scattered. China is the main market for bird's nest consumption. The penetration rate among high-net-worth individuals is second only to vitamins. China's bird's nest market is 27.2% CAGR in 2017-2022, and is expected to grow from 43 billion yuan in 2022 to 92.1 billion yuan in 2027, with a 5-year CAGR of 16.5%, including 15.55% pure bird's nest CAGR and bird's nest +&+ bird's nest CAGR 26.14%. In terms of the pattern, competition in the industry is currently fierce and concentration is low. In 2022, the CR5 in the Chinese market was 11.9%, and Tsubamehouse's share was 5.8%, and the market share continued to increase in 2020-2022.
The company is growing steadily, and the core management is highly professional. The company's development history can be traced back to 1997. After many years, it has developed into the world's largest bird's nest enterprise. The company's revenue and profit have also maintained steady growth in recent years. The CAGR of revenue and net profit to mother in 2020-2023 were 14.72% and 18.15% respectively. At the same time, overall gross margin increased steadily, and the overall net interest rate fluctuated slightly around 10%. Core management teams such as Huang Jian, founder and chairman of the company, Zheng Wenbin, director, and Li Youquan, general manager, have deep professional backgrounds. At the same time, they established an employee equity incentive platform in 2020, and announced their intention to launch an equity incentive plan again in March '24.
Freshly stewed bird's nest and other bottled bird's nests maintained a relatively rapid growth rate. The company's main products are pure bird's nest products, “bird's nest +” products and “+ bird's nest” products. Pure bird's nest accounts for the largest share of revenue. The revenue in 2023 was 1.794 billion yuan, with a CAGR of 12.69% in 2020-2023. The growth rate of bird's nest+ and + bird's nest is relatively fast, with a CAGR of 48.85% in 2020-2023. Looking at the specific product segments of pure bird's nest, the revenue CAGR for bowl, freshly stewed bird's nest, other bottled bird's nest, and dried bird's nest in 2020-2022 was 9.67%, 22.94%, 23.11%, and 0.82%, respectively.
+ Among bird's nest, the Bird's Nest Porridge and Yan Baoshi skincare products series launched in 2023 contributed 0.023 billion yuan and 0.017 billion yuan in revenue respectively in that year.
Online and offline go hand in hand. Currently, the company's online and offline channels account for a relatively balanced ratio. Among them, online and offline revenue in 2023 were 1.104 billion yuan and 0.86 billion yuan respectively, and the online and offline revenue CAGR for 2020-2023 was 15.17% and 14.14% respectively. At present, the company's offline channels have covered all cities directly under the Central Government and provincial capitals in China. Among them, the number of distribution stores has increased a lot in recent years. By the end of 2023, it had 96 self-operated stores and 647 distribution stores opened by 229 dealers. Online channels. As of the end of 2023, the company had 27 self-operated online stores and 18 dealer online stores on platforms such as JD, Tmall, and Douyin. In addition, it also had customers from 15 e-commerce platforms such as JD, Vipshop, and Tmall supermarkets.
Profit forecasting and valuation. We expect the company's 24-26 EPS to be 0.51/0.57/0.65, respectively. The relevant comparable company's 24-year PE is 6-28 times, giving the company 25-28 times PE in 24 years, which corresponds to a reasonable value range of HK$13.86 to HK$15.52 based on the exchange rate of HK$1 = $0.92, covering the “superior to the market” rating for the first time.
Increased risk. Increased competition, poor market expansion, fluctuating material prices, etc.