Event: on April 19, the company released its 2015 annual report. During the reporting period, the main business income was 247 million yuan, an increase of 102.45% over the same period last year, belonging to the net profit of the parent company-35.66 million yuan.
The company also released its quarterly report for 2016, with operating income of 133 million yuan during the reporting period, an increase of 648.15% over the same period last year, with a net profit belonging to the parent company of-16.3462 million yuan and a loss of 101% over the same period last year.
Our analysis and judgment:
The lower price of cattle and sheep products in the market has dragged down the gross profit margin, and the "Big Beef cattle Strategy" has promoted a substantial increase in business income from breeding and fattening cattle. In 2015, the company's "Big Beef cattle Strategy" led the sales of breeding livestock and the production and marketing of beef and mutton products, and expanded the production capacity of the new slaughterhouse. During the reporting period, the sales revenue of breeding livestock business increased by 620% compared with the same period last year, and the income of fattening cattle business increased by 3684.88%. In the first quarter of 16, the breeder livestock and cattle and sheep products business continued 15 years of sales growth, mainly from Australian subsidiary livestock sales and benefiting from the gradual implementation of the "Big Beef cattle Strategy". In 2015, the company's gross profit margin fell due to the downturn in the global dairy market, the lower prices of breeding livestock at home and abroad and the lower prices of cattle and sheep products. It is expected that with the gradual landing of the "Big Beef cattle Strategy", the layout of the whole industry chain of beef cattle is gradually improved, and the company is gradually affected by market fluctuations.
The company's whole industry chain layout Angus beef cattle breeding, products are located in high-end catering. The company introduces purebred Angus cows from Australia and raises them in accordance with American grain-fed beef standards, positioning the western and foreign food consumption market of China's high-end beef to fill the gap between supply and demand of China's high-end beef. The purebred Angus beef produced by the company not only has better meat quality and higher grade than the grass-fed beef imported from Australia and New Zealand, but also has a strong price competitive advantage compared with the same level of American grain-fed beef. The original excellent germplasm and grassland advantages have established a certain barrier for the company's big beef cattle whole industry chain strategy, and the differentiation competitive advantage is significant.
The company took the lead in occupying grassland resources, adopted the way of cooperative breeding with farmers, realized light asset breeding, and gradually entered the harvest period. Through the "company + peasant household" breeding model, the company can trace the source and sell to the high-end consumer market through the "two ends with the middle" to ensure the quality and food safety of the germplasm. The intermediate link provides farming technical services and financing support to farmers, improve farmers' breeding efficiency, reduce the risk of company fixed assets investment and production costs, and contribute to the expansion of breeding scale. We estimate that in 16-18, the output of purebred Angus will reach 2500 picks, 7000 picks, and the average gross profit per head can reach more than 40%. Profits are about to enter a period of reversal and high growth.
High-end western beef is the main direction of beef consumption upgrading. The size of the domestic beef market is about 400 billion, and the scale of high-end western beef market has increased by 100 times in 9 years, reaching 600-70 billion. The rise of the middle class and the fact that the post-90s generation became the main force of consumption under the influence of Western culture is the main driving force for sustained demand growth. The high-end beef market of western food is a new blue sea. 1) American smuggled beef, which traditionally occupies the market, is declining due to the impact of the crackdown on smuggling; 2) domestic beef is insulated from high-end western beef due to lack of varieties and business philosophy; 3) imported Australian beef is restricted by breeding methods and slaughtering industry system, so it belongs to middle-and low-end beef and can not meet the demand of high-end food and beverage.
Investment advice: due to the uncertainty of the IPO, regardless of the impact of the IPO, we expect the company to achieve a net profit of RMB 0.39max in 2016-18, corresponding to an EPS of RMB 0.21max 1.11max. Maintain the Buy-An investment rating with a target price of 27 yuan for 25 times PE,6 in 2017.
Risk tips: policy risk; food safety risk