Panda Dairy is a leading domestic condensed milk company. It has been deeply involved in condensed milk for more than 20 years and has gradually accumulated three core competencies, including brands, products, and channels. Driven by consumption upgrades, the condensed milk market has broad room for growth under the trend of pan-catering standardization; cheese enters the category dividend stage; the cream sector benefits from the rapid growth of baking and maintains a high level of prosperity. The company forges ahead, relies on its existing advantages & adopts differentiated competitive strategies, and continues to enjoy industry dividends and seize the incremental market. It is expected to catch up with foreign investors at an accelerated pace in the future, giving a target price of 56.0 yuan for the first time, corresponding to PE being 84/56 in 2021/2022, double the “growth” rating.
A leading domestic condensed milk enterprise with broad prospects for development. Panda Dairy has been deeply involved in the field of condensed milk for more than 20 years. It has a high brand influence and popularity, and is well recognized by customers. New solid milk products such as cheese and cream were launched in 2018, and diversified businesses were gradually formed. Currently, the core business is mainly B-side, mainly serving industrial & catering customers, and efforts are being made to expand household consumption scenarios. In 2019, the company achieved operating income of 604 million yuan, an increase of 0.4%, and net profit of 67 million yuan, a decrease of 29.7%. Growth is expected to improve after short-term adjustments.
Solid milk industry: Consumption upgrades open up space, foreign investment dominates & Chinese capital gains strength. With the support of industrial policies, driven by consumption upgrades, and the Westernization of diets, solid dairy products have huge opportunities for development. ① Condensed milk: The trend of pan-food standardization continues to increase demand for condensed milk, and it is expected that medium to high unit growth will be maintained in the future. ② Cheese:
The industry has entered a phase of rapid expansion, and double-digit growth is expected to continue in the future. ③ Cream: The rapid development of the baking industry is driving the expansion of the cream market, which is expected to achieve high unit growth in the future. Looking at the competitive pattern, foreign investment is leading for the time being, and Chinese investors have a deeper understanding of Chinese consumption. They have differentiated competitive advantages in various fields such as marketing and services, and it is expected that they will continue to catch up in the future.
Build core barriers between brand+product+channel and continue to catch up with leading foreign investors. ① Brand strength: The company has been working hard and intensively in the field of condensed milk for a long time. Based on the original brand genes, the company has created brand barriers through high-quality, cost-effective products & high-quality differentiated services. ② Product strength: The company has accumulated deep technology and talents, attaches great importance to R&D, and continues to break through the problems of solid milk technology. At the same time, the company is good at grasping new consumer trends, laying out innovative categories, and opening up upward space. ③ Channel strength: The company's B-side channel layout is leading, and the construction of a nationwide marketing network has been initially completed. The future plan is to rely on the first-mover advantage of condensed milk to expand catering channels through product combinations, adopt regional differentiation strategies, and expand retail channels from the bottom up. Making concerted efforts, the company hopes to continue to make breakthroughs in the three major business segments of condensed milk+cheese+cream and quickly catch up with leading foreign investors.
Future outlook: Condensed milk nuggets an incremental market, cheese enjoys category dividends. ① Condensed milk: High quality, cost-effective products & high-quality differentiated services. We hope to continue to seize the incremental market and achieve rapid growth under the trend of pan-catering standardization. It is expected to increase 7% in 2020 and 26%/25% respectively in 2021-2022 after adjustment; ② Cheese: It is expected that the company will work simultaneously on the B&C side to create differentiated products on the catering side, using the “old” condensed milk
Mingqi has opened up “new” channels for baking, and the trend is positive; on the retail side, it promotes channel layout with differentiated offensive strategies, and at the same time promotes store marketing plans to win at the terminal. In the future, it is hoped that revenue will continue to increase by 64%/267%/74%; ③ Butter: At present, the company has overcome the technical difficulties of room temperature cream and has certain process advantages. The next step is to continue to open up the industrial chain layout to accelerate growth. Revenue is expected to increase by 98%/100%/100%/in the future. 86%
Risk factors: food safety issues; increased market competition; new products & new market development falls short of expectations; risk of fluctuations in raw material prices.