Haixin is an established frozen products company. It has a series of frozen surimi, frozen meat products, and high-end fish products. Over the past few years, the company has changed its strategic direction and opened up platforms. On the one hand, it has broadened categories to develop rice and noodle products, and on the other hand, it has broken through capacity bottlenecks through leasing+self-construction. Categories and production capacity restrictions have all been opened up, and it is expected to enter a stage of rapid growth. The details are as follows:

Core views

An established quick-frozen products company, pioneered the layout of high-end products, and the brand is well-known. The company's “Haixin” brand was founded in 1903. Since 1997, it has accelerated innovation and developed in the direction of industrialization. It has gradually formed an overall business system with a series of frozen surimi products as the core, taking into account other frozen foods such as frozen meat products. Since 2014, the company has been developing high-end surimi products through the acquisition of Zhejiang Yuji. Yuji products is a high-quality brand among high-end frozen surimi products, and has a group of loyal consumer fans. Through the company's vigorous distribution and promotion, revenue achieved compound double-digit growth.

Leasing+self-construction breaks the capacity bottleneck, and production capacity is expected to double in the next three to five years. The company has major production bases such as Jinshan Branch, Dongshan Tengxin, Zhejiang Yuji, and Zhoushan Tengxin. As sales increase, in order to effectively expand production capacity and solve production capacity bottlenecks, the company uses a leasing model to expand production capacity and rent a factory in Mawei, which will increase production capacity by 15,000 tons by the end of this year. Furthermore, the company built a new project with an annual output of 100,000 tons of frozen fish products in Lianjiang and a new raw materials factory in Zhoushan. It is expected to be put into operation in 23, and production capacity can be doubled at that time.

Acquire Baixuishen and explore the frozen rice and noodle market. The company can quickly supplement the production capacity of frozen noodles and rice through acquisitions, expand and enrich the product range, which can better meet the needs of downstream dealers to support delivery, and collaboratively use existing channels to achieve the effect of 1+1>2.

Financial forecasting and investment advice

We predict that the company's EPS for 2020-2022 will be 0.17/0.23/0.29 yuan. According to the comparable company valuation method, the 20-year valuation is 56 times, corresponding to the target price of 9.63 yuan, which is the first purchase rating.