Rating: BUY (Initiation)
Target price: RMB24.00
Share price (23 Jul): RMB10.76
Market Cap (RMBm): 3,973.2
Up/downside: 123.0%
We initiate coverage with a BUY call and PT of RMB24 (123% upside potential). Due to the supply shortage in 2021, erythritol price continued its boom after the CNY. In 1H21, Baolingbao Biology expects a net profit of RMB47.73~65.09m. 2Q net profit would come to RMB38.90~56.26m (median: RMB47.58), up 62% yoy and 439% qoq. In order to expand capacity further, it plans to raise no more than RMB712m for the erythritol, allulose and other projects via private placement. Full subscription from controlling shareholders implies their confidence on Baolingbao.
Erythritol: strong demand; capacity shortage continuously boosted prices
With the trend of sugar-free and low-sugar products, demand for erythritol would continue to grow. Domestic demand will become the core driver for the growth. We expect the CGR of domestic demand in the future to exceed 40%, and the global demand for erythritol would reach 285,000 tons by 2025E. Currently, the market price of erythritol maintained at RMB30,000/ton due to capacity shortage. We believe price will be at a high range. As the higher time costs and uncertainty for new entrants, in the short term, existing companies like Baolingbao Biology will be big beneficiaries. In the long run, cost advantages will become the core competitiveness of those enterprises.
Allulose: High value-added natural low-calorie sweetener-the next top seller
With the approval of the US FDA, allulose is currently licensed in 13 countries including Japan, South Korea, Canada, Australia, and New Zealand. Allulose still cannot be used in China. Allulose would see a sales growth in the domestic market if approved by National Health Commission. Currently, domestic manufacturers have begun to expand to this track and companies like Baolingbao Biology have achieved export sales. We expect Baolingbao to complete the trial production of liquid and solid allulose in 2020, which will bring RMB1.12m export sales. It would build a base with allulose (dry basis) capacity of 30,000 tons p.a., as an important component of future core products.
Beneficiary of sugar-reduction demand
As a leader in the functional sugar industry, we believe that its core advantages fall on: 1) R&D and innovation: With industry-leading R&D investment, the company participated in making more than 20 industry standards and one international standard, dominating the industry; 2) Supply chain: Currently it is the only one domestic functional sugar manufacturer, covering all functional sugar categories. After the new capacity expansion, its erythritol capacity will reach 60,000 tons and allulose capacity will reach 30,000 tons, fully meeting the growing demand of downstream customers; 3) Brand and market position: The company has continued to strengthen its marketing and promotion for many years, fulfilling customized demand and maintaining strong customer stickiness.
Valuation and risks
Excluding additional share dilution, we expect the net profit of RMB200/290/380m in 2021/22/23E, up 302%/47%/28% yoy. Factoring in the rapid growth of the company's future net profit and peers’ valuation, we assign a PE of 30x in 2022E and derive a PT of RMB24, with a target market value of RMB9bn.
Risks include: fluctuations in downstream customer demand; fluctuations in raw material prices; intensified industry competition; lower-than-expected product sales; approval failure
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評級：買入(啟動)
目標價：24.00元人民幣
股價(7月23日)：10.76元人民幣
市值(人民幣)：3973.2
上漲/下跌：123.0%
我們以買入通知和24元人民幣的PT(123%的上行潛力)開始覆蓋。由於2021年的供應短缺，赤蘚糖醇價格在元旦後繼續上漲。寶靈寶生物預計，2011年第一季度實現淨利潤47.73~6509萬元。第二季度淨利潤將達到3890~5626萬元(中位數：47.58元)，同比增長62%，季度利潤增長439%。為了進一步擴大產能，該公司計劃通過定向增發籌集不超過7.12億元人民幣的資金，用於赤蘚糖醇、大豆糖等項目。控股股東的全額認購意味着他們對寶靈寶充滿信心。
赤蘚糖醇：需求強勁；產能短缺持續提振價格
隨着無糖、低糖產品的發展趨勢，赤蘚糖醇的需求將繼續增長。內需將成為拉動經濟增長的核心動力。我們預計未來國內需求的CGR將超過40%，到2025年全球赤蘚糖醇需求將達到28.5萬噸。目前，由於產能短缺，赤蘚糖醇的市場價格維持在3萬元/噸。我們相信價格將處於高位。由於新進入者的時間成本和不確定性較高，短期內，像寶靈寶生物這樣的現有公司將是大受益者。從長遠來看，成本優勢將成為這些企業的核心競爭力。
Allulose：高附加值天然低卡路里甜味劑-第二暢銷
在美國FDA的批准下，Alulose目前在日本、韓國、加拿大、澳大利亞和新西蘭等13個國家和地區獲得許可。Allulose仍不能在中國使用。如果獲得國家衞生委員會的批准，Allulose在國內市場的銷售將出現增長。目前，國內廠商已經開始向這一軌道擴張，寶靈寶生物等公司已經實現了出口銷售。我們預計，寶靈寶將在2020年完成液體和固體大麥糖的試生產，這將帶來112萬元的出口銷售額。作為未來核心產品的重要組成部分，它將建設一個年產30,000噸大豆糖(幹基)的基地。
降糖需求受益者
作為功能性糖行業的領先者，我們認為其核心優勢在於：1)研發創新：公司以行業領先的研發投入，參與制定了20多項行業標準和1項國際標準，主導行業；2)供應鏈：目前是國內唯一一家功能性糖生產企業，涵蓋所有功能性糖品類。新擴能後，赤蘚糖醇產能將達到6萬噸，胡蘿蔔糖產能將達到3萬噸，充分滿足下游客户日益增長的需求；3)品牌與市場定位：公司多年來持續加強營銷推廣力度，滿足了定製化需求，保持了較強的客户粘性。
估值和風險
不包括額外的股份稀釋，我們預計2021/22/23E年度淨利潤為人民幣200/290/3.8億元，同比增長302%/47%/28%。考慮到公司未來淨利潤的快速增長和同行估值的快速增長，我們在2022年給出了30倍的市盈率，得出了24元人民幣的PT，目標市值為90億元人民幣。
Risks include: fluctuations in downstream customer demand; fluctuations in raw material prices; intensified industry competition; lower-than-expected product sales; approval failure
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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.
