Inventory Of China'S Dairy Enterprises: Erie'S Leading Position Is Stable And Its Valuation Advantage Is Obvious.

After studying a large number of excellent enterprises in the world, we can find that most of these enterprises share a common feature, that is, they are in a good industry.

What is a good industry? The author thinks that the products and services provided by the industry must be users just need, there is no obvious substitute, nor will the user demand decline because of the change of time.

For example, the field of household appliances is a very typical example. Why is the performance of air conditioning enterprises represented by GREE and Mei far superior to that of TV enterprises represented by SKYWORTH, Hisense, Changhong and Konka? This is because air-conditioning products are more rigid than TV users, and there are no other obvious alternatives to air conditioning. There are too many substitutes for mobile phones, notebooks, tablet computers and so on, so air conditioning is a far better industry than TV.

In addition to the air-conditioning industry, I think dairy products are also a very good industry, because people have great changes in their taste preferences for other kinds of beverages such as fruit juice, and there are too many alternatives, and competition is fierce. Milk is a business that users need steady and continues to grow. There is no obvious substitute for it. It is a very good industry in the field of food and beverage. Therefore, the author has been highly concerned about the dairy industry.

In a good industry, the most valuable long-term investment must be the best one. Today, we will systematically check the performance of China's dairy enterprises to find the most valuable enterprises.

　　 02

When investing in a listed company, investors have a very important but often neglected indicator, that is, the dividends of listed companies.

Dividend ability is a comprehensive index that combines several key elements. As long as a listed company has a good dividend paying ability, it implies that the company has good profitability, healthy cash flow status and positive feedback to shareholders' corporate culture. It also means that the future growth of enterprises does not depend on large-scale fixed assets investment. More importantly, enterprises are at a reasonable level of valuation. Let's first take a look at the dividend levels of various dairy enterprises.

According to the latest dividend plan in 2020, the shares of Yili share a dividend of 0.81 yuan, a total share capital of 6 billion 96 million shares, a dividend fund of 4 billion 937 million 760 thousand yuan, Mengniu Dairy share dividend of 0.181 yuan, a total share capital of 3 billion 936 million shares, dividends of 712 million yuan, China's flying crane share dividend 0.19 Hong Kong dollars, the total share capital 8 billion 933 million shares, the dividend fund is 1 billion 736 million Hong Kong dollars; Guangming dairy share dividend per share. Yuan, the total share capital of 1 billion 220 million shares, dividends only 159 million yuan.

According to the total dividends since listing, Erie is leading the total 5 billion 404 million of Mengniu, 25 billion 457 million of the bright 2 billion 578 million and 1 billion 598 million of the flying crane.

The core gap between the four listed companies in dividends is the huge gap between income and profit levels. According to the latest 2019 earnings report, in terms of revenue, Yili ranked first in 90 billion 223 million yuan, followed by Mengniu in 79 billion yuan. Guangming ranks third in 22 billion 563 million yuan, and flying crane ranks fourth in 13 billion 722 million yuan. In terms of net profit, Erie also ranked 6 billion 934 million in the first place. Mengniu ranked 4 billion 105 million yuan in the second place. Unlike income ranking, Feida 3 billion 995 million yuan net profit is third, while Guangming has a net profit of 498 million yuan. Among them, in Mengniu's net profit of 4 billion 105 million yuan, a large part came from selling non profit and loss resulting from the sale of sovereign wealth and local government subsidies.

In addition to the profit sharing gap brought about by dividends, there is also a huge gap between the four companies in the dividend rate. For example, the average dividend rate of Erie over the past year was 58.64%, and in 2019 it was as high as 70.86%. The dividend payout rate of other companies was much lower.

The deeper reason behind the larger dividend rate is the gap in the efficiency of asset utilization. ROE (net assets yield) is the core index to reflect the profitability and management of listed companies, and is also the most valued index of investment master Buffett. Erie shares have been doing well in ROE. Data show that from 2011 to 2019, the net assets yield has been more than 20% for 9 consecutive years. Higher return on assets means that companies can generate more profits with less capital, which requires less capital.

According to statistics, in the whole A share market, there are only 13 enterprises that can achieve more than 20% net assets return rate for 9 consecutive years. For example, Guizhou Moutai, GREE electric appliance, Haitian flavor industry and Heng Rui medicine are the most famous stocks of A shares.

　　 03

In determining the long-term investment value of an enterprise, besides the current revenues and profits, we need to look at its potential for growth in the future. If an enterprise has good profitability at present, but it will stagnate or even slide in the future, it will be difficult for investors to get the favor of investors. Take Lenovo Group, a well-known IT company in China, for example, its PC business also has a considerable profit of tens of millions of dollars. However, because the PC industry is destined to be a shrinking market, Lenovo's stock price has been sluggish in recent years, with a market value of only about 50 billion Hong Kong dollars.

From the perspective of growth rate, Erie dairy industry is robust, and has maintained a two digit income growth for 9 consecutive years in the past 2011-2019 years. At the same time, while adhering to the steady growth of the dairy business, Erie has also played the advantage of platform, implemented the development strategy of multi category layout in the field of big health, and actively layout the international development, and put forward the brand new strategic objective of "the first global dairy industry and the top five healthy food", showing a steady and sustainable growth trend.

After Mengniu sells Jun Le Bao in 2019, there will be a big decline in revenue and profits in 2020. Mengniu's growth in the past largely depends on the development mode of "epitaxy merger", but the sale of Kun Lok share also means that the past development mode is facing challenges. In addition, Mengniu's large dealer mode is also facing great challenges, and the in-depth distribution mode of Erie flat is showing more and more advantages.

As an old representative of China's dairy industry, Guangming dairy industry has shown a clear trend of lagging in recent years, and the gap between the revenue of Yili and Mengniu is increasing. And from the perspective of income growth, it has been in a single digit or negative growth for many years, and has also been shrinking to the base Market in Shanghai.

Feihe has become a star enterprise in the field of dairy products in China in the past few years, thanks to its excellent performance in the infant formula market. It was listed on the Hongkong Stock Exchange last year. But the main problem of Feilu is that the product structure is too single, so that it has obvious growth "ceiling", and as Erie and Mengniu increase their input in infant formula milk powder, market competition is further aggravating. In the medium to long term, the current growth rate of flying crane is very difficult to sustain.

Flying crane also saw the ceiling in the field of infant milk powder, and began to lay out in the field of nutriment and other fields, but progress was slow. In 2019, the total revenue of flying crane nutrition was 580 million yuan, not only increased but decreased 10% compared to the same period last year.

Judging from the growth potential of an enterprise, in addition to looking at its income and profit growth trend, it is important to look at its future investment. R & D investment is an important index to measure the product innovation capability and future growth potential of an enterprise. In terms of R & D investment, Erie has led the industry with excellent advantages and invested more than three times as much as Feida. And Mengniu's R & D investment is still less than 1/2 of Erie.

　　 04

Through the above comparison, no matter in terms of revenue, profits, asset utilization efficiency or growth potential, Erie's leading position in the industry is very stable. However, besides good industry and good company, good timing is another key factor of investment.

According to the closing price of the latest trading day, the market capitalization of Yili, Mengniu, Guangming and Feida were 192 billion 400 million yuan, 119 billion 851 million Hong Kong dollars, 18 billion 700 million yuan and 143 billion 291 million Hong Kong dollars respectively. Corresponding to their net profit in 2019, the P / E ratios were 27.7, 28.9, 37.55 and 35.87 times respectively.

From the perspective of price earnings ratio, Erie's valuation advantage is obvious. Although compared with Mengniu and Guangming, it has good growth, but has a lower P / E ratio. And the valuation of Feida dairy has overdrawn its future growth space. In May 14th, the price of China's flying crane fell by 10.89%. It was reported that the fund was selling 292 million 500 thousand shares of China's flying crane shares, leaving 3 billion 876 million yuan to leave. This means that the price of fehang has been seriously overestimated by investors.

Past historical experience has also proved that the real bull stocks in the stock market are not the stocks that China's flying crane has surged and plummeted in the short term, but that Moutai, Ely and GREE are the leading enterprises with stable performance and strong risk resistance. They may not be too keen on performance for a certain period of time, but put them in a longer cycle, and the compound interest effect will eventually lead to them. Become the most dazzling enterprise.