Manor Ranch: North West Dairy King, wants to use IPO to become a national first-class enterprise

Following the listing on the main board of the Hong Kong Stock Exchange in October 2015, Lanzhou Manor Ranch Co., Ltd. (A Stock Code: 002910) was successfully listed on the Shenzhen Stock Exchange on October 31. This is an important milestone in the history of the development of Manor Ranch. , marking the vanguard of the Northwest Dairy Industry officially landed in the A-share capital market, becoming the first A+H-stock dairy listed company in China!

Northwest Dairy King, strive to become a domestic first-class dairy company

The IPO prospectus disclosed by Manor Ranch stated that the company intends to issue no more than 46.84 million shares, raising funds of 310 million yuan, and investing in 10,000 imported fine dairy cow breeding construction projects and self-service milk machines and supporting facilities construction projects. This will greatly enrich the Group's funds and play a significant role in boosting the company's main business and building a domestic first-class dairy company.

Established in 2000, Lanzhou Manor Ranch has been in the past 17 years. It is currently a vertical integrated dairy company integrating dairy farming, dairy processing and sales in Qinghai, Gansu Province. The company's size and market share rank first in the region. The largest dairy products companies in Gansu and Qinghai. The company currently has two dairy processing plants in Lanzhou, Gansu and Xining, Qinghai, and eight large-scale, standardized dairy farming farms in Gansu, Qinghai and Ningxia. The design has a stock of 16,000 heads and currently has 9,300 heads.

Manor Ranch's main products include pasteurized milk, sterilized milk, brewed milk, fermented milk, milk-containing beverages and other liquid dairy products. It has two local brands, “Manor Ranch” and “Shenghu” and a nationality. The brand “Yongdaobu” currently has more than 60 product items, mainly including distribution, distribution and direct sales channels, and more than 8,000 distribution outlets covering over 80% of the markets in Gansu and Qinghai. After the successful listing of A+H Hong Kong, Lanzhou Manor proposed to use Gansu and Qinghai as the base to occupy the northwest and radiate the national dairy market. According to the data, the company's products have a market share of nearly 20% in Gansu and Qinghai, and have obvious brand advantages and high market position in the regional market.

From the perspective of market structure, the major enterprises in the national dairy industry can be divided into four categories: one is the national brand represented by Mengniu Dairy and Yili, and the other is Weiwei, New Hope, Bright Dairy, Manor Ranch, Sanyuan shares, Ningxia Xiajin Dairy Group Co., Ltd. represented by the regional brand; third is Jinan Jiabao Dairy Co., Ltd., Nanjing Weigang Dairy Co., Ltd., Xi'an Yinqiao Dairy Group as the representative of the local capital city as the base camp The local brand of the market; the fourth is a foreign brand represented by French Danone and Nestlé Switzerland.

The main business income of Manor Ranch is mainly from Gansu Province and Qinghai Province. In the first half of 2014-2016 and the first half of 2017, the main business income of the region accounted for more than 90% of the company's main business income. In this regard, the person in charge of Lanzhou Manor said that the company's national development plan will be promoted one after another. At the same time, it will not rule out the acquisition or restructuring in the northwest region in the future, and the company will strive to become the goal of domestic first-class dairy companies. At present, Manor Ranch has passed ISO9001 quality management system certification, HACCP food safety system certification, integrity management system certification, green food certification, and won the honor of “National Agricultural Product Processing Demonstration Enterprise”, national key leading enterprise of agricultural industrialization, and national leading poverty alleviation enterprise. .

At present, Manor Ranch has maintained continuous growth for many years, both in terms of revenue and net profit. From January to June 2017, Manor Ranch realized an operating income of 311 million yuan and a net profit of 37.714 million yuan. In 2014-2016, it realized operating income of 598 million yuan, 626 million yuan and 666 million yuan, and net profit of 65.408 million yuan during the same period. 73.427 million yuan and 75.916 million yuan.

The following figures 1 and 2 are the main business indicators and financial data of Manor Ranch in recent years, from which you can see its continuous development and changes:

National dairy production and per capita demand continue to grow, providing a good development environment for the company

According to various statistics, in 2010, China's liquid milk production was 30,528 kilotons, 3.3 times that of 2000; dry dairy products were 3,138 kilotons, 3.8 times that of 2000. From 2011 to 2015, liquid milk increased by 4.76%, 11.24%, 17.11%, 27.10%, and 27.92%, respectively, and dry dairy products increased by 4.11%, 27.03%, 15.38%, -19.79%, and -16.66, respectively. %. In general, China's dairy production maintains a relatively fast growth momentum, and the rapid growth of dairy production is an important factor driving the development of dairy farming.

Figure 3 below: Production of liquid milk and dry dairy products in China from 2000 to 2015

In the next 10 years, with the promotion of large-scale livestock and poultry farming, China's dairy farming will enter a critical transition period, and the scale of scale will continue to increase rapidly. It is estimated that in 2024, the proportion of large-scale farming of more than 100 dairy cows in China will reach 65%, an increase of 20% over 2014. The increase in the degree of scale will directly promote the improvement of the yield level of Chinese dairy cows. Looking ahead, domestic dairy cow yields will increase by 0.9 tons, reaching 6.5 tons in 2024. This is due to the increase in yields, and China's milk production will continue to increase. It is estimated that in 2020, the output of milk will be 43.97 million tons, and in 2024 it will reach 47.6 million tons. The average growth rate during the outlook period is about 3.50%. With the improvement of living standards of urban and rural residents, the development of urbanization and the plan of drinking milk for students, there is still much room for improvement in the future of dairy products consumption.

The demand for dairy products in China has generally shown an increasing trend. Although the growth rate is not very large today, it can be seen that dairy products have gradually become an indispensable food for people's daily consumption. In 2010, China's per capita liquid milk consumption was 9.6kg, compared with 19.1kg in 2016, an increase of 87% compared with 2010. However, compared with developed countries, China still has a large gap, and there is still much room for growth. China's population base is relatively large, and per capita consumption is very low, so the market prospects are still very large. This is also an important reason why global dairy companies are optimistic about the Chinese dairy market and continue to enter China.

Figure 4 below: Per capita milk consumption in parts of the world and in China

At present, with the improvement of living standards of urban and rural residents, urbanization development and student drinking milk plans, there is still room for improvement in the consumption of dairy products in the future. The per capita consumption of dairy products in China's urban and rural residents (including consumption of dairy products such as milk drinks, ice cream, cakes, etc.) continues to increase. It will reach 39.56 kg in 2024, with an average annual growth rate of 2.2%. Among them, the per capita consumption of urban residents is 46.30 kg, with an average annual growth rate of 1.5%; the per capita consumption of rural residents is 27.60 kg, with an average annual growth rate of 2.3%. It is estimated that the total domestic consumption of dairy products will be 56.61 million tons in 2020 and 63.03 million tons in 2024. The average annual growth rate during the outlook period is 2.3%.

It can be said that the good industry background and development prospects have laid a solid and solid momentum for the sustainable development of domestic dairy companies such as Manor Ranch.

Gansu is traditionally one of the six pastoral areas in the country. It is mainly based on beef cattle (sheep). Although dairy farming and milk consumption have a long history, the dairy industry is relatively slow to develop and the milk source is relatively scarce. Although there are nearly 30 million people, the scale of dairy consumption has been relatively stable, and the consumption power of residents has been slower, especially for the rural population. This provides sufficient development time for Manor Ranch to continue to grow bigger and stronger locally. However, with the introduction of national first-line brands such as Mengniu and Yili, the future market competition will be more intense, and Manor Ranch needs to be better strategic strategy for the longer term.

IPO enriches the company's capital chain, and the future growth of Manor Ranch can be expected

Manor Ranch is expected to issue this issue. It plans to raise a total of about 349 million yuan in A shares, with a net fund raising of about 310 million yuan, of which 260 million yuan will be invested in 10,000 imported improved dairy farming projects, and 49.31 million yuan will be invested. Self-service milk machine and supporting facilities construction project. Compared with the net amount raised by HK$148 million when the Hong Kong stocks were listed in 2015, the re-raising of RMB 310 million has greatly enriched the Group's funds. As planned, this also contributed to the expansion of the company's main business. Quite a big boost.

In recent years, with the strict restrictions on the market access of dairy processing industry and the strict rectification of existing dairy processing enterprises, the market concentration of China's dairy industry has increased, and the market share has turned to brand awareness and strength. Large enterprises with significant economies of scale. In particular, some large dairy companies have expanded their scale through asset restructuring, mergers and acquisitions, and strong alliances, and strengthened control over milk sources and sales channels. This trend will become more apparent in the future: the national market share is highly concentrated in the national first-line brands, and the regional market share is highly concentrated in regional strong brands. This is very beneficial to the future expansion of the regional leading brand manor farm, especially after the success of the IPO, it is more favorable for it to become bigger and stronger.

From the cash situation of the previous company, the annual cash balance of Manor Ranch increased year by year. By the end of June 2017, the company's cash balance on the account was 394 million yuan, an increase of 121 million yuan from the end of 2016, which was also increased compared with the same period of last year. 19%. Although the funds raised by the A-shares have all the use plans, they do not have to pay from the original funds pool to develop related businesses. From this point of view, it also enriches the company's capital chain and lays down the national expansion for the future. solid foundation.

As the first domestic A+H stock dairy listed company, the stock price linkage of Manor Ranch A-shares and H-shares will become closer and closer, which will help each other. With the continuous promotion of A-shares and the success of IPOs, the H-shares of Manor Ranch have leaped forward and reached a new high of 11.18 Hong Kong dollars since the listing on September 27, 2017. After that, the trend has slowed down, but they have remained at HK$10.6. To the 11 Hong Kong dollar range. On August 21, the closing price of 5.41 Hong Kong dollars, to September 27 recorded a record high of 11.18 Hong Kong dollars, Manor Ranch stock price soared 1.07 times in a short period of time, the rally was like a rainbow. As of November 10, Manor Ranch H shares share price of 10.80 Hong Kong dollars.

An analyst from CITIC Securities believes that from the prospectus, the A-share Manor Ranch issue price is 7.46, the issue price-earnings ratio is 22.96, and the industry average price-earnings ratio is 41.13 times, showing a large upside. As of November 10, the share price of A-share Manor Ranch is 23.01 yuan, and its premium difference with H-shares is obvious, which may help to continue to raise the share price of H-shares.

Great organizations will have a high-end goal. Manor Ranch has always been committed to "building a good quality and creating a brand of the times", striving to shape the well-known brands in the west, building a modern corporate culture in which all employees share common beliefs, and striving to become China's first-class dairy company. Give all investors a good return!