1H16 resultsshowed decent improvements.Revenue of the fresh pork segment, thelargestgrowth contributor, expanded by 9.93 % YoY. OPM increased from 6.52% in 1H15 to 9.49% in 1H16. NPM also improved from 3.92% in 1H15 to 6.24% in 1H16. Moreover, overall CCC shortened to 36.83 days in 1H16 from 39.33 days in 1H15.
Unique features of the Group.The Group’s operationsacross the world allow it to realize more operating synergies. In 1H16, it imported the low-cost pork from the U.S. to offset the effect of high pork price in China. In addition, the Group is the topoperator of licensed slaughterhouses in China. As the gatekeeper of the Chinesepork market whilethe authorities aretightening the safety standard and reducingthe number of licensed slaughterhouses, the Group would acquire more bargaining power over hog suppliers and influence on the pork price in the country.
The industry environment is supportive of the Group’s growth.As pork price has peaked recently in China, we expect a mild decline in 2017. Nonetheless, we believe theGroup’s synergy among its geographical segments,unique operating model in China, and strong demand ofpork in key markets would support growth. The Group’s business segmentswould see consistent volume growth, but ASP growth would be more volatile due to the uncertainty in commodity price. We expect the Group’s revenue growth to reach 11.43% YoY in FY18E, while its GPM and NPM would beabove 19% and 4% in the next three years. Maintaining an efficient working capital management, CCC would be ~32 days in the next few years.
Initiate with BUY; TP at HK$ 7.68.We applythe DCF and market multiple methods to derive our TPofHK$ 7.68, which represents 14.94x/13.53xFY16E/17EP/E, and2.38x/2.25x FY16E/17EP/B. Initiate with BUY.
Risk factors: 1) Macroeconomic risk; 2) Commodity price risk; 3) Substitution effect from alternative protein sources; 4) Biological asset risk; 5) Regulatory risk; 5) Food safety risk, 6) Foreign exchange risk, 7) Interest rate risk.
首页
微信公众号
证券之星APP
