A leader in oral care, positive change and continuous innovation. The company's predecessor has a history of 85 years, and its core brand “Cold Acid” had a leading position in the market share of 60% in the field of anti-sensitive toothpaste from 2021 to 2023, and has remained fresh for a long time. ① Strong management resilience & high efficiency: Revenue and net profit CAGR increased steadily by 10%/22% each in 2019-23, superior to peers; channel cost reduction and efficiency, steady increase in profitability, stable upstream and downstream cooperation, and leading operational efficiency. ② The mixed reform of state-owned enterprises stimulates vitality: Chongqing has 59.8% strong shareholding power. In 2020, mixed ownership reform was implemented, strategic investment was introduced, and core key employee shareholding was implemented. ③ Management deeply accompanies growth: Most of the core management has been honed at the grassroots level, and the team is stable and has strong centripetal strength.
Industry: User mentality is advanced, and industry expansion and upgrading are parallel. ① Increased awareness of oral care, driven by an increase in average prices: According to Euromonitor data, in 2023, China's per capita oral care consumption was 4.9 US dollars, which is still a big gap compared to developed countries such as the US and France. The 23-28E oral care market CAGR was 3.0%, of which 0.6%/2.4% of volume/price were the main drivers. ② Expanding the efficacy of basic categories and building an ecosystem of innovative categories: demand refinement, whitening, fresh breath, and anti-sensitivity toothpaste accounted for 26%/19% and 16% of sales in 2023, respectively. Among them, the growth rate of anti-sensitive toothpaste was 8pct higher than the basic & full-effect care category; sales of children's oral care increased by 12% CAGR in 18-23 years. The categories are diversified, and the Gaoke single category, which has characteristics such as portability and intelligence, is growing at an excellent rate. Euromonitor data shows that electric toothbrushes/mouthwashes are expected to account for 19%/4% of the oral care market share in 2028. ③ Breakthrough in the direction of segmentation, and the share of domestic products increased: the market share of domestic brands in the top 20 oral care products increased from 19.1% in 2014 to 30.7% in 2023, and imported and domestic brands in the toothpaste market also showed a trend of losing ground.
Core advantages: brand-based, technical accumulation. ① Strong brand strength, and youthful marketing adds momentum: The company introduced Ogilvy as the brand manager in 1996, and the cold sour slogan “Hot, Sour and Sweet, Eat If You Want” is deeply rooted in the hearts of the people; in recent years, through rejuvenation, the brand has been revitalized, building a matrix of ambassadors, cross-border co-branding, and innovative marketing to refresh global brand awareness.
② Deep technology accumulation, industry, academia, and medicine have established expert status: self-developed anti-sensitivity technology matrix, double anti-sensitivity invention patent technology was awarded the first prize for major scientific and technological achievements in China's dental cleaning and care products industry, achieving 18 achievements; bioceramic material technology has obtained national invention patents, which are significantly superior to peers in fighting dental essence sensitivity and promoting tooth surface remineralization; collaborating with many universities at home and abroad to explore dental specialties and medical fields.
Growth outlook: category & channel advancement, expansion of dental care and beauty. The unit price of all categories of the company is lower than that of foreign competitors, and the product structure is still mainly toothpaste, which is expected to increase customer demand through product upgrades and category expansion. ① Product innovation strengthens the middle and high-end: the adult category “anti-sensitive+” expands multiple benefits, such as specialized research platforms to solve complex dental problems; medical research platforms upgrade technology and highlight clinical endorsements to accelerate the increase in the unit price of adult toothpaste; seize the needs of young people, such as “Polar White” pump toothpaste, break through traditional packaging and grow into a core online product; the children's category builds new growth momentum through refinement and specialization; layout the electric oral care category to “create a second growth curve”. ② Low-line distribution barriers+online global expansion: The company has a well-structured and comprehensive sales network system. The KA channel is covered by distribution and direct supply models, the sinking market collaborates with dealers to develop and distribute, using superior channel resources to cover hundreds of thousands of retail terminals across the country, and is expected to continue to receive the dividends of urbanization development; the high growth rate of various online categories and large room for promotion rate increases, and full-link digital management deposits consumer data assets to help product innovation. ③ Entering the dental care and aesthetic extension ecosystem: Develop innovative categories around the fields of dental desensitization, orthodontics, plastic surgery, etc., strengthen basic research and development based on the “production generation, R&D generation, and reserve generation” mechanism, and expand strategically to high-end manufacturing, dental care, and beauty service industries.
Profit forecast and valuation: Revenue for 2024-26 is estimated at 1.52 billion yuan, 1.71 billion yuan, and 1.93 billion yuan, up 10.5%, and 13.1% year-on-year, respectively; net profit to mother is 0.16 billion yuan, 0.19 billion yuan, and 230 million yuan, respectively, up 12.0%, 20.6%, and 20.3% year-on-year, respectively. Considering the company's channel barriers and growth space, refer to the industry's 2024 25-30 times PE, with a reasonable value range of 22.97-27.57 yuan. For the first time, coverage gave it a “superior to the market” rating.
Risk warning: New product development falls short of expectations, competition intensifies, sales models cannot adapt to market changes, etc.
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