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GF Securities Ge Zheng
Implement the "value regression project" to highlight the value of donkey hide gelatin
Since taking office in May 2006, General Manager Qin Yufeng has put forward the "value return project", committed to building China's first "quasi" brand of nourishing health care products. Through structural adjustment of products, donkey hide gelatin has returned to the mainstream high-end consumer groups, reflecting its historical value again. After a year of adjustment, the boldness and ability of the new management gradually emerged.
Devote to cultural marketing and expand donkey hide gelatin industry
The company "will enter the high-end health care product market based on animal collagen in the future." Focusing on the functional advantages of donkey hide gelatin and market demand, the company will intensify its layout, start with the main efficacy and large varieties of donkey hide gelatin, and develop 10 aspects of compound preparations and donkey hide gelatin health care products, including anti hypoxia, anti fatigue, anti radiation, and improving hemoglobin content. Strive to make donkey hide gelatin food and health products reach the current scale of donkey hide gelatin drugs within five years. Create another donkey hide gelatin in five years.
Profit forecast and investment rating
It is estimated that the net profit of the Company in 2007 and 2008 will be 247.73 million yuan and 310.24 million yuan, with earnings per share of 0.473 yuan and 0.592 yuan respectively.
We very much agree with the company's development idea of transforming from medicine to health care products. As a health care product, donkey hide gelatin will have a broader market space and greater independent pricing ability.
With clear product positioning and clear development ideas, the company is expected to enter the health care product market and become the first "quasi" brand in China's health care product market; At the same time, the company will issue to all shareholders in 2008 Bermuda The raised funds are used to integrate the donkey hide gelatin industry. The company is expected to maintain rapid growth in the next few years and become the leader of health products enterprises. We give a long-term investment rating of "buy". If the company's share price is adjusted to about 25 yuan, it is recommended to intervene.
On May 21, 2007, we attended the shareholders' meeting of the company and communicated with Qin Yufeng, the general manager of the company, Wu Huaifeng, the deputy general manager and secretary of the board of directors, and the staff of the office of the secretary of the board of directors.
After the equity struggle between the original management and China Resources Group ended, how the new management managed Ejiao became the focus of attention. After taking office, Qin Yufeng, the general manager known as the "young commander", focused on the three hot spots of raw materials, marketing and research and development, put forward six concepts: value return project, in-depth marketing, market-oriented raw material base construction, in-depth development of donkey hide gelatin medicine and food, quality standard tackling and cultural marketing, and committed to building China's first "quasi" brand of health products, Try to create another donkey hide gelatin in five years.
Implement the "value regression project" to highlight the value of donkey hide gelatin
So far, it has a production history of more than 1000 years. It was originally produced in Dong'e Town, Pingyin County, Jinan, so it is called donkey hide gelatin. It was first recorded in the "Shennong Hundred Herbs Classic". In the "Compendium of Materia Medica", Li Shizhen, a doctor of the Ming Dynasty, called it "the holy medicine" and "the three treasures of traditional Chinese medicine" together with ginseng and deer antler. Donkey hide gelatin is a good product for tonifying blood. In ancient times, it was a "tribute". It can not only nourish blood, but also nourish yin. It was regarded as a good product for tonifying by the royal palace nobles.
Since taking office in May 2006, General Manager Qin Yufeng has demonstrated a different business philosophy from the former General Manager Liu Weizhi. It proposed the "value return project", committed to building China's first "quasi" brand of nourishing health care products, and through structural adjustment of products, donkey hide gelatin returned to the mainstream high-end consumer groups, reflecting the historical value again. After a year of adjustment, the boldness and ability of the new management gradually emerged.
Adjust product structure to open space for future price increases
After Qin Yufeng took office, he adjusted the structure of the existing donkey hide gelatin products. The overall idea is: the price of donkey hide gelatin blocks with low gross profit rate (100% of donkey hide gelatin) will be increased in a limited amount, taking the high-end route; Increase the promotion and popularity of compound donkey hide gelatin medicines (the content of donkey hide gelatin is about one third of that of donkey hide gelatin block) and health care products with high gross profit rate, and raise the price slightly.
In May 2006 and January 2007, the factory price and retail price of donkey hide gelatin block rose in an all-round way, with each price increase exceeding 20%, and the price after price increase increased by 93% compared with 2002; The price increase of donkey hide gelatin paste was less than that of donkey hide gelatin block, and the price after the price increase was 22.7% higher than that in 2002.
The national maximum retail price applied by the company was approved in January 2007, and the maximum retail price of 500g paperback donkey hide gelatin block was raised to 180 yuan, which is 20% more than the current retail price of 150 yuan. At the same time, the company's "Fu" brand donkey hide gelatin and compound donkey hide gelatin paste have been approved as the national confidential varieties of traditional Chinese medicine, which will strengthen the company's independent pricing ability, opening up space for future price increases of donkey hide gelatin.
Qin Yufeng, the general manager, also said that depending on the sales situation, it would not be ruled out that the price could be raised again this year.
In the long run, the price of donkey hide gelatin block will double the current price.
Strengthen channel control capability
When Liu Weizhi, the former general manager, was in office, he raised the product price four times. However, due to the weak terminal control ability, the problem of channel inventory and fleeing goods occurred, which affected the follow-up operation of the company, and finally ended in failure.
After taking office, General Manager Qin Yufeng adopted the principle of "dealers subtract and dealers add". That is to say, the number of dealers will be reduced to more than 50 after comprehensive assessment of dealers' credit, emphasis on the company's products and price implementation; At the same time, the original order once every three months was changed to once every month, which greatly reduced the dealers' stock; In addition, a special price maintenance team has been set up to disqualify dealers who cannot implement the uniform price of the company's products. After this series of adjustments, the ability to control the channel has been greatly strengthened, and there is no previous phenomenon of fleeing goods and inventory after the price increase.
Integrate sales resources and make full depth distribution
The company divides the national market into 4 sales regions and 28 offices, implements "full product distribution" and "full terminal coverage", makes full depth distribution in pharmacies, hospitals, shopping malls and supermarkets, and implements the layout according to the principle of "721". That is, 70% of the sales force focuses on the first line products (donkey hide gelatin block, compound donkey hide gelatin paste) and the first line markets (Shandong, Anhui, Zhejiang, Hubei, Guangdong, Sichuan, etc.); 20% of the sales force is concentrated on the second tier products (Ejiao Buxue Granules, Ejiao Buxue Paste, Ejiao Yuanjiang, Hailong Jiaokou Oral Liquid) and the second tier markets (Beijing, Shanghai, Hebei, Henan, Hunan, Jiangsu, Chongqing, Shanxi, Shaanxi, Yunnan, etc.) that need to achieve breakthroughs; 10% of the marketing force is focused on other non donkey hide gelatin products (yellow gelatin, Angong Zhixue Granules, etc.) and emerging markets (Tianjin, Xinjiang, Lanzhou, Europe, America, Southeast Asia, etc.) that are trying to be distributed.
Control the upstream donkey skin resources and solve the bottleneck problem of raw materials
Unique water resources are irreplaceable
Dong'e water, donkey skin and production process constitute the three major competitive advantages of Dong'e donkey hide gelatin products.
Dong'e is located in the shadow of Taishan Mountain and the sun of Taihang Mountain. The two mountains of Yanjin meet here. According to Shen Kuo's Meng Xi Bi Tan, "Dong'e also helps the flow of water. Taking well water to boil gelatin is called donkey hide gelatin, stirring turbid water is clear, people wear lower diaphragm, and expelling phlegm and stopping vomiting are all taken to help the water flow downward, clear and heavy. Therefore, Dong'e donkey hide gelatin has a unique effect, which has a great relationship with its water quality.". In 1981, Dong'e donkey hide gelatin factory, in order to confirm the previous records, cooperated with the Shandong Provincial Hydrogeological Team, Shandong University and other scientific research units to conduct a comprehensive and systematic survey of the groundwater quality in Dong'e. The test showed that its water is rich in minerals such as potassium, sodium, calcium, magnesium, iron, zinc, strontium, and the specific weight is up to 1.0038, and each cubic meter of water weighs 3.5 kilograms more than the ordinary water. The water with significant proportion is helpful for the extraction of impurities during boiling, which is more conducive to the play of the efficacy of donkey hide gelatin. Without this high specific gravity water, impurities can not be removed, and donkey hide gelatin is easy to smell. Compendium of Materia Medica contains: Ejiao, the black donkey skin is the real water in East Afghanistan, the real one does not make the skin smelly, and the summer moon is not wet and soft. It is verified that Dong'e donkey hide gelatin has a deep-rooted origin with Dong'e water. This unique water resource that cannot be copied and replaced has become the unique competitive advantage of Dong'e donkey hide gelatin products.
Donkey skin resources are in short supply, and the number of stocks and sales are down
China has a history of raising donkeys for more than 4000 years. There are rich varieties of donkeys, and the maximum number of donkeys raised was more than 12.7 million. However, since the beginning of the 21st century, the number of donkeys has decreased. At present, there are about 40 million donkeys on hand all over the world. In China, there are about 10 million donkeys on hand and 1.8 million donkeys on sale.
The main reasons for the decline in the number of donkeys on hand are: first, it is difficult to breed donkeys, with a long cycle, slow effect and low efficiency. After agricultural machinery replaced the donkey labor force, farmers lost their enthusiasm for raising donkeys, and farmers raised donkeys in bulk. The second is the marginalization of donkey production, which has basically not entered the government's vision and agenda, and is in a state of natural development. Third, the production of donkey raising lacks the pull and stimulation of market demand, and has not formed large-scale, commercialization and industrialization. Fourth, the scientific research on donkey breeding is very weak, and the research on improved breed breeding, rapid propagation and scientific breeding is basically blank. Fifth, there is a lack of public support and encouragement.
Establish donkey breeding base to drive donkey industry economy
As one of the important raw materials of the company, donkey hide is related to the quality of donkey hide gelatin products and is irreplaceable in production. The company consumes 1 to 1.2 million donkey skins every year, about 5% of which are imported from abroad.
Although the decrease of donkey stock and sales does not endanger the company's production, donkey hide, as an irreplaceable raw material of donkey hide gelatin, is bound to become the biggest bottleneck restricting the company's development if we do not take precautions. In order to solve this problem, Qin Yufeng, the general manager, adopted the strategy of "four to two", that is, to improve the enthusiasm of the government and farmers by building a donkey meat market and expanding the donkey industry. "A donkey can be sold for 2000 yuan, while a piece of skin can only be sold for 100 yuan. Only by improving the meat market can farmers' enthusiasm for raising donkeys be protected." After taking office as general manager, Qin Yufeng has successively established eight donkey breeding bases in Qinyang, Henan, Dali, Yunnan, Yili, Xinjiang, Yuepu Lake, Xinjiang, Wudi, Shandong, Gaotai, Gansu, Qingyang, Gansu and Fuxin, Liaoning, It is estimated that there will be 10 donkey breeding bases by 2008. The goal is that each base will contribute 100000 donkey skins to the company in the next 3-5 years. On the one hand, the completion of the base can provide a certain guarantee for the supply of donkey skins in the future, and more importantly, through the demonstration role of the base, it can drive the surrounding farmers to raise donkeys, and ultimately mobilize the enthusiasm of farmers across the country to raise donkeys from point to area, so that the number of donkeys on hand will increase year by year, and achieve sustainable development.
While establishing the donkey breeding base, Dong'e donkey hide gelatin, Laiyang Agricultural College, Xinjiang Academy of Animal Sciences, Shandong Tianlong Science and Technology Company and other units jointly established the "Shandong Tianlong Donkey Industry Economics Research Institute" to carry out research and development of the commercial donkey industry; More than 120 local government departments, colleges and universities, scientific research institutions and enterprises have joined the ranks of economic development and utilization of the commercial donkey industry.
Internationalization of raw material supply and expansion of donkey skin import channel While the company is actively establishing a donkey breeding base, the plan for internationalization of donkey skin raw material supply and the import channel of foreign donkey skin are also gradually opening. The company has imported donkey skins from Egypt, Peru and Brazil, and it will also become a reality to import donkey skins from Pakistan this year.
Devote to cultural marketing and expand donkey hide gelatin industry
Cultural marketing aims to expand donkey hide gelatin industry
In 2007, China Brand Research Institute announced the ranking of China's Top 500 Most Valuable Trademarks, and the "Dong'e" brand of Dong'e Ejiao became the only brand on the list in the Ejiao industry. The company is applying for "China Time honored Brand" and national intangible cultural heritage. In order to let more people know donkey hide gelatin, Qin Yufeng, the general manager, proposed the strategy of cultural marketing after taking office. Since September 2006, the company has serially published Ejiao culture and historical records in 12 mainstream evening newspapers in the form of soft articles, aiming to solve the problems of "why Ejiao is called", "what Ejiao is", and "what are the functions of Ejiao", and broadcast advertisements on CCTV, Phoenix Satellite TV, and provincial and local TV stations, The purpose is to increase the public's awareness and popularity of donkey hide gelatin and expand the industry of donkey hide gelatin.
Bright prospects for entering the international market
In 2006, the company won the title of Canada's only donkey hide gelatin manufacturer Ministry of Health The GMP certificate of traditional Chinese medicine products and TGA registration certification, the donkey hide gelatin, which used to be exported as food, will enter the Canadian drug market legally from now on, and the donkey hide gelatin products will also enter the world mainstream drug market as drugs from now on.
Dong'e donkey hide gelatin is the largest enterprise producing donkey hide gelatin in China. The annual output and export volume of donkey hide gelatin account for more than 75% and 90% of the same industry in China, respectively. However, due to the difference between the principles of traditional Chinese medicine and western medicine, donkey hide gelatin and other traditional Chinese medicines have not been recognized by the western medicine industry, and they are isolated from the mainstream drugs in the world. Dong'e donkey hide gelatin was successfully registered with the GMP certificate of traditional Chinese medicine products issued by the Ministry of Health of Canada, which was called a major breakthrough for donkey hide gelatin to truly go global by the Chinese traditional medicine industry. It is reported that the company has set up branches or selected agents in 12 countries and regions, including Germany, Malaysia, Singapore, Japan, South Korea and Hong Kong. With the recognition of Chinese medicine abroad, the foreign market will become the growth point of the company.
At present, the company's first batch of health products entering Japan include: tortoise and deer Erxian soup, peach blossom and health care products. The company expects sales of 600 million yen as a minimum this year.
Carry out in-depth development of medicine and food simultaneously, and rebuild a donkey hide gelatin in five years
Qin Yufeng, the general manager of "five years to create a donkey hide gelatin", made an inscription. The company "will enter the high-end health care product market based on animal collagen in the future." Focusing on the functional advantages of donkey hide gelatin and market demand, the company will intensify its layout, start with the main efficacy and large varieties of donkey hide gelatin, and develop 10 aspects of compound preparations and donkey hide gelatin health care products, including anti hypoxia, anti fatigue, anti radiation, and improving hemoglobin content. According to the company's plan, 6 to 8 health foods with the functions of increasing bone density, beauty, improving sleep, anti fatigue, anti hypoxia, and strengthening immunity will be developed and approved before 2010, and more than 5 approval numbers will be obtained. 1 to 2 biological health products focusing on fermentation technology will be developed and approved, The market coverage and differentiated functions of the company's products will have a new situation.
Qin Yufeng, the general manager, attaches great importance to the nourishing and health care market. He envisions that the scale of donkey hide gelatin food health care products and donkey hide gelatin series drugs should be equal, at least, the scale of donkey hide gelatin food health care products should reach the current scale of drugs.
Profit forecast and investment rating
Prediction premise:
In 2007, the price of donkey hide gelatin block was increased by 30%, and in 2008 and 2009, it was conservatively estimated that the price would be increased by 10% annually, and the sales revenue would increase by about 15% - 20%; In 2007, the price of compound donkey hide gelatin paste was increased by 8.5% in boxes and 44.6% in bottles, and the sales volume was increased by 20%~25%; The sales volume of Ejiao Buxue Granule and Ejiao Buxue Cream will increase by more than 50% every year; Donkey hide gelatin health care products maintained a rapid growth of about 100%, achieving a revenue of 100 million yuan in 2007; Other products, medical devices and pharmaceutical excipients maintained a steady growth of about 10% from 2007 to 2009; The tax rate is 25% since 2008; The company increased its publicity efforts, and other expenses remained stable except for the increase of operating expenses.
The pricing of drugs is subject to National Development and Reform Commission However, most health care products are priced by the manufacturers themselves. We very much agree with the company's development idea of transforming from medicine to health care products. As a health care product, donkey hide gelatin will have a broader market space and greater independent pricing ability.
It is estimated that the net profit of the Company in 2007 and 2008 will be 247.73 million yuan and 310.24 million yuan, with earnings per share of 0.473 yuan and 0.592 yuan respectively. As of July 5, 2007, the closing price of 25.88 yuan corresponds to the dynamic P/E ratio of 54.7 times and 43.7 times.
Considering the company's clear product positioning and clear development ideas, it is expected to become the first "quasi" brand in China's health care product market by entering the health care product market; At the same time, the company will issue Bermuda style warrants to all shareholders in 2008 to raise funds for the integration of donkey hide gelatin industry. The company is expected to maintain rapid growth in the next few years and become the leader of health care products enterprises. The company is a high-quality enterprise worth long-term investment. We give it a long-term investment rating of "buy". If the company's share price is adjusted to about 25 yuan, it is recommended to intervene.
Sina statement: The content of this article is purely the author's personal view, only for investors' reference, and does not constitute investment advice. Investors operate accordingly at their own risk.
