China Pet Holdings (002891) 2019 Interim Report Review: H1 Performance Continues to Pressure Rapid Growth in Domestic Market

China Pet Holdings (002891) 2019 Interim Report Review: H1 Performance Continues to Pressure Rapid Growth in Domestic Market

The rapid development of China’s pet industry is catering to the “big industry, small leader” stage. While consolidating the advantages of the pet snack export market, the company is building more and more domestic independent brands. At present, the distribution and product end have been gradually completed.

We maintain the company’s EPS forecasts for 2019/20/21 to 0 respectively.

5/0.

84/1.

46 yuan, maintain “Buy” rating.

Matters: China Pet Corporation announced the 2019 semi-annual report, and the company realized operating income7.

8.7 billion, an annual increase of 21.

58% (+37 in the first quarter quarter).

45%); the net profit attributable to shareholders of listed companies was 16.11 million yuan, a year-on-year decrease of 38.

91% (Q1 -45.

75%), the company’s comprehensive gross profit margin 22.

43% (20 in the first quarter).

69%).

Three due to resonance, H1 performance continues to decrease.

The company’s maximum profit limit is mainly due to: 1) the rise in chicken prices.

In H1 2019, the average price of big breast chicken in Shandong is 15008 yuan / ton, each time + 24%. The overall cost of chicken is about 30% -40%.

2) due to the impact of trade tariffs.

Affected by the Sino-US trade friction, China ‘s pet food exports are currently subject to a 25% U.S. tariff, and the company is expected to bear 5% (there is no tariff impact in the same period last year).

3) The impact of the expansion of the domestic market.

The report totals that the company’s selling expenses are 77.01 million, + 59% per year, and the selling expense ratio is 9.

78% (8 in the first quarter.

46%, compared with 7 in the same period last year.

48%).

In addition, due to the increase in interest income, the company’s financial expense ratio was 1.

4% (0% in the same period last year.

21%) Global presence and steady overseas growth.

The company’s products are exported to the United States, Europe and East Asia.

Affected by the merger of major customers and category changes, the company’s overseas market in Q1 2018/2019 maintained rapid growth.

The company also continues to increase its global production and sales layout. Except for its own factories in the United States and Canada, the company reported that it 北京夜网 has transferred 49% of the equity of Aitao Pet Living Products (Cambodia) Co., Ltd. for US $ 4.9 million in cash.Artificial advantage for product production.

Multi-brand, omni-channel strategy, full bloom in the domestic market.

Since 2017, the company has accelerated its transformation to brand owners, mainly through two aspects: 1) the brand side.

Enriching around naughty brands, overcoming the ten brands that have been in the market today.

Naughty brands have also strengthened their brand influence by adjusting product formulas, rebranding, and developing new products.

2) Channel side.

The company focuses on online and continuously strengthens the coverage of professional channels.

Following the ten-year strategic agreement between the company and Suning and Tmall, on April 16, the company signed a strategic 无锡桑拿网 cooperation memorandum with JD.com in the future. It will become a customized product for user portraits and market trends provided by major platforms in the future., Further cooperation in the field of new retail.

And through in-depth cooperation with Ruipeng (Zhong pet holds Ruipeng 1.

25% of the shares, the superstar that Ruipeng belongs to holds 6% of Zhongcang), and the company’s professional channel coverage capacity is expected to be further strengthened.The continued use of e-commerce channels will increase in 19/20, and it is expected that the domestic market will still maintain a rapid growth of more than 50% in 19/20 (H1 in 2019 will achieve domestic revenue1.

5.2 billion, previously +39.

71%).

Risk factors: 1.

Industry growth rate; 2.

Brand building was less than expected; 3.

Risk of raw material price fluctuations; 4.

Increased risk of trade disputes.

Investment suggestion: China’s pet industry is developing rapidly and is welcoming the stage of “big industry, small leader”. The company is consolidating the advantages of pet snacks export and increasing the construction of internal independent brands. At the channel end, the product end has been gradually completed.
We maintain the company’s EPS forecasts for 2019/20/21 to 0 respectively.

5/0.

84/1.

46 yuan, maintain “Buy” rating.