Key points of investment

Basic information: Sobao Protein is one of the few companies in the industry with a complete industrial chain in the soybean protein deep processing industry. The company specializes in soybean protein series products. It has a complete industrial chain, clear internal organizational structure, and rich management experience, and is well known at home and abroad. In 2019-2022, revenue CAGR = 20.21%, net profit CAGR = 36.55%, and the scale continues to expand.

Industry prospects: The soybean protein industry is widely used, and the market share will continue to be concentrated in the lead in the future. Soy protein is widely used downstream and can be used to produce casual snacks, compound meat products, etc.; according to QYResearch, the compound annual growth rate of the global soybean protein market in 2020-2026 is about 3.4%. Currently, the top producers in the domestic soybean protein industry account for 60% of the domestic market share, and the industry concentration is relatively high. The company's soy protein sales scale accounts for about 10% of the domestic soybean protein manufacturer.

The company's competitive advantage: The brand/product/production capacity advantage is obvious, and the development foundation is constantly being consolidated. 1) Brand side: It has registered trademarks such as “Soho”, “Sotai”, “Sokang”, “Solor”, “Kangtai”, and “Wonderford”. At the same time, it has become a global strategic partner with Bungie of the United States, which is one of the top four food merchants in the world, and is committed to the global layout of the industry. 2) Product side: We have 7 core technologies and 15 patent rights, and can provide customers with matching products and professional solutions according to customer needs. 3) Production capacity side: The capital raised this time is intended to be invested in the 30,000 ton soybean tissue brushed protein production line construction project and the 5,000 ton soybean granular protein production line construction project to further consolidate the development foundation.

Profit forecast and 6-12 month forward overall fair value range: We expect the company's 2023-2025 revenue to be 17.13, 18.31, and 1,980 billion yuan, or -7%, +8% year-on-year; net profit is 1.67, 1.80, and 200 million yuan, respectively, -1%, +8% over the same period, -1%, +8%, and +12%. Based on the share capital after issuance, the corresponding EPS is 0.87, 0.94, and 1.05 yuan, respectively. Based on the valuation results of the PE Act and the DCF method, we estimate that the company's 6-12 month forward fair value range is 36.72-3,986 billion yuan. Based on the upper limit of share capital after issuance, the corresponding 6-12 month forward fair value range for each share is 19.18-20.82 yuan, the corresponding price-earnings ratio range corresponding to net profit deducted from non-previous net profit in 2022 is 21.85-23.72 times, and the corresponding price-earnings ratio range for non-post-return net profit is 24.09-26.15 times. Using 2023E to predict net profit on the net profit scale, the range corresponding to the price-earnings ratio of the issuance is about 22-24 times. Compared with other market segment leaders, the company has high brand awareness and R&D capabilities in the field of soybean protein, and the competitive advantage in the industrial chain is obvious. Therefore, we believe that referring to the price-earnings ratio level of leading companies in the agricultural and sideline food processing industry segment, it is reasonable to give 22-24 times PE to the company in '23.

Risk warning: Risk that the assumptions for profit forecasting are not established to affect the company's profit forecast and valuation conclusion; risk that the valuation level is higher than the industry average; business risk; financial risk; corporate governance risk; technical risk; risk of capital raising investment projects; risk of increased market competition; risk of increased market competition; risk of fluctuations in upstream raw material prices and falling gross margin; risk of fluctuations in energy prices; risk of overseas market operations, etc.