Rating: BUY (Initiation)
Target price: RMB25.20
Share price (17 Aug): RMB17.76
Market Cap (RMBm): 3,159.5
Up/downside: 41.9%
We initiate coverage with a BUY call and price target of RMB25.20. Xiaoming’s commercial chickens accounted for 12.52% of the domestic market share, and its business scale is within the forefront of the industry.
Analyze the development overview and future trends of egg production
China is the world's largest producer and consumer of eggs. Egg production has consistently ranked first in the world since 1985. As the per capita egg consumption of rural consumers increases, we expect egg market capacity to increase in the future. The current structure of China's egg production industry has small-scale and large-market characteristics. Compared with developed countries in Europe and the US, China's industry has room to expand in terms of breeding level and production efficiency. However, benefiting from environmental protection policy requirements and the promotion of safe production, industry concentration has continued to increase, so the trend of a large-scale breeding market seems inevitable. High-quality egg laying hen companies will enjoy a brand premium in the future, in our view.
In terms of breeding egg laying hens, although domestic heritage layer breeds have a high market share, their performance lags behind those of foreign heritage breeds. Based on in-depth research into layer breeds and the rich varieties of breeding materials, we expect the performance of domestic heritage layer breeds to gradually improve in the future, and its market share to further rise.
Xiaoming's egg and chicken business leads the industry; improving indicators
Located in Ningxia, Xiaoming integrates the introduction, production and promotion aspects of the laying hen seed business. The company uses advanced breeding models to create a sales model of centralized breeding and decentralized incubation. The products are disseminated to more than 31 provinces and regions across the country and also exported to Mongolia. In recent years, the company's various indicators have continued to improve, its market share in major segments has continued to increase, and its brand power across the product supply chain has continued to increase. Under the large-scale development trend of the layer hen industry, the company's operating strength could raise its scale advantages and bring in more major customers.
Competitive advantages; prioritizes biosafety to build up future growth
The company has established an advanced disease prevention and control system and values biosafety. It ensures safe and efficient operations through geographical isolation, strict control of vehicles and drinking water entryways, and closed-system management of breeding farms. On the basis of its biosecurity system, the company created a "centralized breeding and decentralized incubator" business model, reducing production costs via farming concentration, improving management efficiency, and innovations in farming areas, a "whole network high bed level support" welfare culture model and improving product quality, which has led to quality layer breeds that are recognized by customers, with good reputation. In terms of product sales, decentralized incubation is used to fully exploit the market, reduce product transportation losses, and achieve efficient utilization of hatchery capacity. The rapid expansion of business has formed a scale advantage. In 2020, the company's commercial chickens accounted for 12.52% of the domestic market share, and its business scale is within the forefront of the industry. A large breeding scale, mature industry network and wide-coverage sales network would help ensure its sustainable development and manage industry fluctuation risks.
Fund-raising projects: to lift production capacity and raise competitiveness
After the company's listing and fundraising, it invested funds in new layer breeding projects in Alxa League and Minning town. We expect that with the gradual implementation of fund-raising investment and construction projects, the company's breeding technology could be significantly improved to ensure future production capacity growth and strengthen its advantages in large-scale breeding.
Valuation and risks
We expect revenue of RMB680m/807m/1.01bn, up 25.97%/18.71%/24.57% yoy, and net profit of RMB115m/170m/ 136m, changing 129.43%/47.08%/-19.78% yoy, corresponding to EPS of RMB0.61/0.90/0.73. With reference to the average valuation of comparable companies, we conservatively give the company a 28x PE, corresponding to market value of RMB4.75bn in 2022E. We initiate coverage with a BUY call and price target of RMB25.2.
Risks include: risks of poultry disease; risks of raw material and price fluctuations; risks of the company's dependence on foreign layer breeders; risks of implementation of fund-raising investment projects; and risks of stock price fluctuations in the short term.
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此文件仅发给指定收件人或机构。其内容可能包含某种享有法律特权或者需要保密的信息。对于任何未经本公司授权而对本文件所载内容进行使用、披露、分发、变更之行为及由此产生的后果，天风国际证券集团有限公司及其联属公司和附属公司（「天风集团」）概不承担任何责任。如您并非此文件的指定收件人或机构，请立即通知天风集团，并立即销毁此文件。谢谢合作。
This message is intended only for the individual or entity to which it is addressed. It may contain legally privileged and/or confidential information. TF International Securities Group Limited and its affiliates and subsidiaries (「TF Group」) does not accept liability for the unauthorized use, disclosure, distribution and/or alteration of any information it contains or the consequences thereof. If you are not an intended recipient, please inform TF Group and destroy this message immediately. Thank you.
評級：買入(啟動)
目標價：25.20元人民幣
股價(8月17日)：17.76元人民幣
市值(人民幣)：3159.5
上漲/下跌：41.9%
我們以買入通知和25.20元的目標價開始覆蓋。小明的商品雞佔國內市場份額的12.52%，業務規模位居行業前列。
我國雞蛋生產發展概況及未來趨勢分析
中國是世界上最大的雞蛋生產國和消費國。自1985年以來，雞蛋產量一直位居世界第一。隨着農村消費者人均雞蛋消費量的增加，我們預計未來雞蛋市場容量將會增加。當前我國雞蛋生產產業結構具有規模小、市場大的特點。與歐美髮達國家相比，中國的產業在養殖水平和生產效率方面都有擴大的空間。但受益於環保政策要求和安全生產的推進，行業集中度持續提升，規模化養殖市場的趨勢似乎不可避免。在我們看來，高質量的蛋雞公司在未來將享受品牌溢價。
在蛋雞養殖方面，國內遺傳蛋雞品種雖然市場佔有率較高，但表現落後於國外遺傳品種。在對蛋雞品種和豐富的育種材料進行深入研究的基礎上，我們預計未來國內遺產蛋雞品種的性能將逐步提高，市場佔有率將進一步上升。
小明的雞蛋和雞肉業務領先於行業；改善指標
小明位於寧夏，集蛋雞種子業務的引進、生產和推廣為一體。公司採用先進的養殖模式，打造集中養殖、分散孵化的銷售模式。產品銷往全國31個省區，並出口蒙古國。近年來，公司各項指標持續向好，主要細分市場佔有率持續提升，跨越產品供應鏈的品牌力持續提升。在蛋雞產業規模化發展趨勢下，公司的經營實力可以提升規模優勢，帶來更多大客户。
競爭優勢；優先考慮生物安全，以促進未來增長
該公司建立了先進的疾病預防和控制體系，重視生物安全。它通過地理隔離，嚴格控制車輛和飲用水入口，以及養殖場的封閉式系統管理，確保安全和高效的運營。該公司在其生物安全體系的基礎上，創建了“集中養殖、分散孵化器”的商業模式，通過養殖集中降低生產成本，提高管理效率，在養殖區創新，“全網高牀水平扶持”的福利文化模式，提高產品質量，使優質蛋雞品種得到客户的認可，口碑良好。在產品銷售方面，採取分散孵化的方式，充分開拓市場，減少產品運輸損失，實現孵化能力的高效利用。業務的快速擴張形成了規模優勢。2020年，公司商品雞佔國內市場份額12.52%，業務規模位居行業前列。一個龐大的養殖規模、成熟的產業網絡和覆蓋廣泛的銷售網絡將有助於確保其可持續發展，並管理行業波動風險。
集資項目：提升產能，提升競爭力
在該公司上市和籌資後，它將資金投入了阿拉善盟和閩寧鎮的新蛋雞養殖項目。我們預計，隨着募集資金投資和建設項目的逐步實施，公司的養殖技術可能會得到顯著改善，以確保未來產能的增長，並強化其在規模化養殖方面的優勢。
估值和風險
We expect revenue of RMB680m/807m/1.01bn, up 25.97%/18.71%/24.57% yoy, and net profit of RMB115m/170m/ 136m, changing 129.43%/47.08%/-19.78% yoy, corresponding to EPS of RMB0.61/0.90/0.73. With reference to the average valuation of comparable companies, we conservatively give the company a 28x PE, corresponding to market value of RMB4.75bn in 2022E. We initiate coverage with a BUY call and price target of RMB25.2.
Risks include: risks of poultry disease; risks of raw material and price fluctuations; risks of the company's dependence on foreign layer breeders; risks of implementation of fund-raising investment projects; and risks of stock price fluctuations in the short term.
免責聲明(DISCLAIMER):
此文件僅發給指定收件人或機構。其內容可能包含某種享有法律特權或者需要保密的信息。對於任何未經本公司授權而對本文件所載內容進行使用、披露、分發、變更之行為及由此產生的後果，天風國際證券集團有限公司及其聯屬公司和附屬公司（「天風集團」）概不承擔任何責任。如您並非此文件的指定收件人或機構，請立即通知天風集團，並立即銷燬此文件。謝謝合作。
This message is intended only for the individual or entity to which it is addressed. It may contain legally privileged and/or confidential information. TF International Securities Group Limited and its affiliates and subsidiaries (「TF Group」) does not accept liability for the unauthorized use, disclosure, distribution and/or alteration of any information it contains or the consequences thereof. If you are not an intended recipient, please inform TF Group and destroy this message immediately. Thank you.
