Bright Dairy (600597): Positioning fresh dairy products to take a differentiated path to enhance competitiveness

Bright Dairy (600597): Positioning fresh dairy products to take a differentiated path to enhance competitiveness

Core point of view: From dairy farms to consumers, creating fresh dairy products. Bright Dairy is a well-known dairy company in China, ranking third in the industry. The three major business segments are liquid milk, dairy products, and animal husbandry.

Bright Dairy combines farm management, dairy processing, cold chain logistics, and milk delivery services to provide 杭州桑拿网 consumers with high-quality liquid milk.

The company’s positioning is to provide fresh dairy products, not only through the light to provide free milk delivery service, but also through supermarkets, convenience stores for retail.

Dairy products are milk powder, cheese, animal husbandry products are raw milk, feed.

Bright Dairy’s revenue in 2018 was 209.

86 ppm, a ten-year increase of -3.

17%, of which liquid milk income 124.

30 ppm, a ten-year increase of -9.

66%, dairy products income 54.

48 ppm, a ten-year increase4.

88%, animal husbandry products income 23.

82 ppm, a ten-year increase of -1.

44%.

The liquid milk differentiated competition plan seeks a unique core competitiveness. Room temperature milk income has been severely reduced, and fresh milk income has increased slightly.

In 2018, the company’s room temperature milk business revenue was about 50 billion yuan, an annual growth of 23%. Against the background of intensified competition in the dairy industry, the company’s cost control measures led to the expansion of room temperature yogurt Moslian’s market share.

In 2018, the company’s fresh milk business revenue was about 7.4 billion, an annual increase of 2.

5%, the sales volume of offline supermarket channels increased, and the sales volume of customized milk delivery channels contracted.

Although the company’s liquid milk revenue has shown a certain margin, its low-temperature milk business, which represents its core competitiveness, has a better trend.

Guangming Dairy chooses a competitive route with Yili to return to the essence of fresh milk, and there are potential market opportunities.

Constrained by factors such as milk sources and radial transportation, the income of low-temperature milk is more likely to show a stepwise increase through the expansion of the new district, and there is a possibility of accumulation.

In terms of channels, the retail price of dairy cows in the retail supermarket is more effective. The expansion of the freezer storage in the convenience stores in the circulation channel has made the sales advantage of fresh milk in the retail supermarket channel more obvious.

The dairy business is quite attractive. The cheese business is growing well and milk powder is competitive.

In 2018, the company’s cheese business income was 10.

71 ppm, an increase of 27 in ten years.

80%, good growth momentum.

The main products of children’s growing cheese are better taste, rich in nutrition, and competitive in the market.

In 2018, the company’s milk powder business income was 43.

34 trillion, basically maintained stable.

New Wright, a subsidiary of the company, provides foundry services to well-known international milk powder brands with stable business relationships.

With the help of New Zealand’s premium milk sources and the domestic sales channel of Bright Dairy, the proportion of New Wright’s high value-added products in New Zealand is expected to continue to increase in the future.

Earnings forecast and investment rating We expect the company’s EPS for 2019-2021 to be 0.

42 yuan, 0.

47 yuan and 0.

49 yuan, the corresponding dynamic price-earnings ratio is 24.

65 times, 22.

04 times and 21.

15 times.

Maintain “Carefully Recommended” investment rating. Risks indicate economic growth and decline in consumer demand; industry policy risks; food safety issues occur.