Recent situation of the company

On June 3, the board of directors of the company flexibly adjusted the timetable and conditions of equity incentive through the restricted equity incentive plan and stock option incentive plan, which is conducive to improving the company's talent assessment system and contributing to the growth and development of the company.

Comment

1. Restricted equity and stock option incentive plan effectively bind the interests of the core team. 1 Stock option incentive plan: grant stock options to specific employees, fully mobilize the enthusiasm of the team, absorb outstanding talents and improve the construction of the echelon of talents. The option grant price is HK $1, and the strike price of the option shall not be lower than the highest of the following prices: the closing price on the day of the offer, the average closing price five days before the date of the offer and the par value of the shares on the date of the offer. 2 restricted equity incentive plan: through the establishment of a trust to buy / subscribe for the company's shares, and grant no more than 1.87% (25 million shares) of the issued shares to a specific object, bind the core interests of the management team, stimulate the company's operational vitality, and demonstrate the company's confidence in future growth.

2. The pet staple food falls to the ground to open the incremental space, and the pet track is subdivided around the "stubborn" series. In 2019, the company launched "stubborn tail" to cut into the pet care track, and won the Tmall Gold make-up Award for the most potential pet cutting-edge brand in 2020. In April 2021, pet staple food brand "stubborn mouth" landed, positioning middle and high-end food, through in-depth cooperation with the Asia-Pacific Pet Research Center to create "patented active bacteria" and other differentiated product highlights. In the future, with the promotion of the "stubborn" series and the penetration of channels, we believe that the company is expected to continue to improve the layout of the pet industry chain and undertake the dividend of the rapid growth of the industry.

3. Product upgrading, category expansion and all-channel cooperation to build sustainable growth. 1 product upgrade: in the traditional advantageous categories such as home care, the company continues to promote the upgrading and iteration of products by virtue of its strong R & D and innovation ability. grasp the fine differentiation, high-end, diversified home care scene needs; category expansion: active layout of high-speed pet, personal care track, actively nurture new growth points, build a second growth curve, the new track has broad growth space in the future. 3 Omni-channel collaboration: the company's self-built e-commerce team makes efforts to expand online channels, from a single Tmall platform to more than 20 platforms such as VIPSHOP and Douyin, we believe that online channels are expected to continue the trend of rapid growth in the future; offline plans to expand millions of distribution outlets, continue to infiltrate the sinking market to grasp the growth potential, the future omni-channel development is expected.

Valuation and suggestion

The earnings forecast for 2021 / 2022 will remain unchanged, and the current share price will maintain an outperform industry rating of 25 times P/Eo in 2021 / 2022 and a target price of HK $11.8, corresponding to 44 times Pmax E in 2021 / 2022, which has 33% room to rise compared with the current share price.

Risk

Product safety and quality problems; single category accounts for a relatively large; related transactions.