Core ideas:
Committed to vertical integration management, chicken deep processing business to maintain a high growth rate. The company's business almost covers the whole value chain of broiler industry, such as chicken raising, slaughtering and processing, distribution and sale of poultry products, feed production, etc., forming an integrated operation from farm to table. In 2016, the company achieved revenue of 3.902 billion yuan, accounting for 45.5% of the revenue from deeply processed chicken products. The average growth rate of B2C business in 2016-20 was 30%. Retail revenue in 2020 was 793 million yuan, with an average growth rate of more than 100% in 2020-20.
Chicken deep processing market space is broad, the industry's high-quality leader is expected to benefit. In the past five years, the scale of the domestic chicken deep processing market has an average annual growth rate of about 14%. China's deep processed chicken products only account for 14% of chicken consumption, which has greater development potential compared with the level of 40-70% in developed countries. The industry concentration of chicken products is low, the current CR5 is only 9%, and the CR4 of the frozen food industry is 70%. The broad market space is expected to give birth to an industry leader with strong competitive advantage.
"123 Strategy" accumulates development momentum, and marketing + channel layout helps B2C transformation. Since 2016, the company has laid out the terminal personal consumption market and built a multi-brand system with "excellent shape" chicken breast as the core. B2C revenue in 2020 increased by 214% compared with the same period last year, accounting for more than 20% of the total revenue.
"Youxing" revenue increased 280% year-on-year; the company vigorously carried out diversified marketing activities, bundled with traffic stars, and innovative forms to promote brand image and values; both online and offline channels. Offline to convenience store format as a foothold, 20 years of year-on-year growth of 271%, online to achieve full coverage of the head e-commerce platform, 20 years of year-on-year growth of 186%, the online-offline ratio is about 8:5.
Investment advice: give a "buy" rating. The company is committed to "farm to table" integrated management, B2C transformation is advancing rapidly, we estimate that the company's EPS in 21-23 years is about 0.18,0.27,0.41 yuan per share respectively. With reference to the industry average valuation, the company is given a 21-year PE valuation of 19 times, with a reasonable value of HK $4.07 per share, with a "buy" rating for the first time.
Risk tips: chicken price fluctuation risk, epidemic risk, food safety and so on.
Note: unless otherwise stated, RMB is used as the currency in this article.