Company Profile
Maiquer Group is the only dairy company directly selling its products via i ts own bakery chain stores.
The company's main products include sterilized milk, modulation milk and milk -containing beverages.
Investment Highlight
Maiquer Group （the company） has seen its bakery business to grow at a faster pace after theacquisition of Zhejiang Xinmeixin Food Industry Co., Ltd. The dairy and bakery businesses jointlydrive the company's growth.
As one of leading dairy producers in Xinjiang, the company focuses on the development ofhigher-end products. Its bakery chain boasts a high reputation in Xinjiang. The acquisition of ZhejiangXinmeixin Food Industry accelerates growth of the bakery chain business.
The bakery chain industry has low concentration, presenting strong prospects for furtherbusiness consolidations. As the only listed company in the industry, Maiquer Group enjoysfirst-mover advantage.
Currently, the s cale of the bakery chain industry has exceeded CNY 100 billion, with the top fiveplayers accounting for less than 10% of the total market share. The industry suffers from poorearnings amid fierce competition. M&As will dictate future trend of the industry. With clearroadmap, Maiquer Group s tarted off with M&As once becoming publicly-traded. The companygradually has gradually expanded i ts footprint from the west to the east, opening nearly 300 news tores. The company has taken various measures to streamline business and improve overallperformance of its newly acquired Zhejiang Xinmeixin Food Industry, whose profitability improveds ubstantially. This manifests Maiquer Group's strong capability in terms of business consolidation andmanagement. In the future, the company will continue ramping up its bakery chain business throughM&As , which we expect will progress at a faster-than-expected pace.
Maiquer Group plans to in the future participate in the restructuring of Hutubi Cattle Farm. It willacquire Xiyuchun, as part of the efforts to develop the complete dairy industry chain.
Maiquer Group has been approved to participate in the restructuring of Hutubi Cattle Farm, whichcurrently raises 25,000 cows and produces more than 70,000 metric tons of milk. The farm'ssubordinate milk producer Xiyuchun is the second largest dairy product brand in Xinjiang, generatingearnings of CNY 60 mi llion. So far its earnings for this year slightly increased. In the second half 2016,Xi yuchun's salesforce e xpands substantially, s trengthening its sales and marketing capacity. Theups tream cattle farm will continue supplying high-quality raw milks. The yogurt products producedby the downstream Xiyuchun milk production company will become a good complement to MaiquerGroup's product mix. We believe the restructuring will instill new vigor into Xiyuchun and greatlyimprove its operational efficiency.
Earnings Forecast and Investment Grading:
Without considering the impact of financial statement consolidation, we forecast the company'searnings at CNY 77 mi llion in 2016, CNY 0.86 mi llion in 2017, CNY 0.98 in 2018. The EPS is projectedat CNY 0.71 in 2016, CNY 0.79 in 2017, CNY 0.90 in 2018, implying 89x 16E PE, 80x 17E PE and 70x18E PE. The company's dairy products and bakery chain business are both on fast increase, showings trong growth prospects. The comapny will rise to become the leader of Xinjiang's dairy productma rket 'as its cattle farm restructuring efforts start to pay off. With clear business strategy and firmimplementation, Maiquer Group has strong potential to deliver breakthrough in both dairy productand bakery chain businesses.
Potential Risk: Slower-than-expected progress in business restructuring, milk price fluctuation.
