Plum biology: strong combination, MSG and amino acid industry pattern is expected to be reconstructed.

Event: cJQMeihua Bio announced the acquisition of 100% of the industry's third Ipin Bio for 3.82 billion yuan, of which 700 million yuan in cash and 660 million shares in the stockIn addition, Meihua will also be targeted to issue no more than 214 million shares, to raise 1.04 billion yuan, intended to pay for the acquisition of Ipin Bio cash portion of the price, as well as Ipone Bio annual output of 200,000 tons of gastric feed additives projectcJQReview: cJQIspin is the third largest in the biofermentation industry, after the completion of the acquisition of Plum will be in the MSG and Susine sub-industry to obtain greater pricing powerIpin Bio is currently the third largest biological fermentation enterprise after Yufeng and Meihua, located in Yinchuan, Ningxia, with an annual output of 220,000 tons of MSG and glutamate, 50,000 tons of sucone, 370,000 tons of lysine production capacityAt present, plum 13 years sales of MSG and glutamate 510,000 tons, sucone 160,000 tons, lysine 300,000 tonsAfter the merger, Meihua Group will exceed 700,000 tons of MSG and glutamate, slightly less than the 1 million tons of The Ufeng Group, and the market share will reach 40%;cJQMSG industry consolidation has basically completed the restoration of reasonable profits is a major trend, but the rise in prices is subject to the strategic intention of The FungChina's MSG industry currently has a market capacity of about 2 million tons, after the integration of CR2 has been close to 90%, the two major leaders through its complete industrial chain and huge capital investment constitute a certain moat, enjoy a clear cost advantageThe remaining small and medium-sized enterprises are basically concentrated in Shandong and Henan and other places, in corn prices, coal and energy costs, labor costs, land sewage and industrial chain integrity of the disadvantage is very obvious, at present mainly rely on depreciation and local tax protection and other advantages in the barely surviveAt present, 8100 yuan / ton of MSG prices, Fengfeng, plum and Yipin can only earn small profits, other enterprises basically can not make a profit, and in the past MSG prices have been more than 10000 yuanBecause MSG accounts for a very low proportion of consumer and downstream consumer spending, downstream consumption is not price sensitive, in the long run, MSG price elasticity is hugeBut in the short term, the 15-year price target for The Company is about 8400-8500 yuan/tonne (including tax), and the price of MSG is expected to stabilize upward in 15 yearscJQPlum has become the largest domestic sucone manufacturers, Susine will become the largest performance elasticity point in the short term The domestic production of Susine in 2013 was 212,000 tons, up 22.4% YoY, with plum blossoms and Ipin expected to account for 80-90% of this In addition to meeting a small amount of domestic demand, China's susine is mainly used for export, china's cumulative exports of Susine 158,000 tons in January-September, up 16% year-on-year The global market is about 400,000 tons, of which 13 years of production of miso, in addition to Germany's Evonik, the United States ADM, South Korea's CJ and so on The merger of Plum and Ipin will have an important impact on industry prices Recently due to strong international demand, some manufacturers have even stopped domestic quotations, prices also rose from about 12,000 / ton in August to the most recent 30,000 yuan / ton According to the current price, the ton profit will be more than 10,000 yuan, plum annual profit will be more than 2 billion yuan Susine is the company's largest short-term performance elasticity point However, in the long run, the total amount of sunine is small, compared with other amino acid products production process is not much different, other enterprises to transfer production and new production capacity is relatively easy;cJQ the short-term supply of lysine is relatively surplus, plum ipin competitive advantage is obvious In 2013, China's lysine production was 1.085 million tons, down 7.2% year-on-year In the first nine months of this year, China's cumulative export volume of lysine was 184,000 tons, up 45,000 tons or 32.8 percent year-on-year The main domestic manufacturers have plum, Shijie, Dentons, gold corn, plum blossoms, Iskin, Fengyuan, Chengfu, Dongxiao, Oriental Hope, etc , the company has occupied the leading position after the merger of Yipin The global market size of lysine is about 2.1-2.2 million tons, and there are also odorin (about 400,000 tons), CJ of Korea, ADM in the United States, Evonik of Germany, etc As both Meihua and Ipin have aggressively expanded their lysine capacity in recent years, resulting in overcapacity in the industry, falling prices and forced products to shift to international markets However, the main production capacity of Meihua and Yipin is located in Xinjiang, Ningxia and Chifeng, coal prices are low, than the northeast of Dacheng and Chengfu and other cost advantages are obvious Dentons Biochemical Amino Acids Division (mainly lysine and sucrose) had a gross margin of -23% and plums at 13%, a difference of 36 percentage points As a result, companies may also continue to expand capacity through cost advantages in the future, pushing Dentons and others out of the market At the same time, the rebound in pig and broiler prices will stimulate a 15-year recovery in the scale of farming, lysine as a feed additive demand will also increase cJQ Ibin's performance commitments have largely reflected the improvement of the company's existing business, the results exceeded expectations more dependent on plum's own business Ipin's net profit for 12-13 years was 110 million and -0.12 billion, respectively, and the 14-year January-July loss exceeded 80 million, and the net profit of 14-16 years was not less than 270,000 yuan, 3.3 billion yuan, respectively The company's past decline in profits is mainly due to the decline in MSG prices, in the near term, MSG prices have rebounded, sunine prices have soared to contribute to the profits of Iline In view of the uncertainty of the future price of Susine, the current performance commitment has basically reflected the synergies after the acquisition of Ipin We believe that the company's better-than-expected results will come more from the improvement in plum's own profits After the rebound in the price of Susine, the company's monthly profit has been close to 150 million yuan, if 15 years of MSG prices can have a further recovery, profits will be even greater Plum's own business has a large profit elasticity for 15 years In recent years, the net interest rate of miso is basically maintained at between 4-5%, but the end-of-life profit margin of the Amino Acid industry in Japan is low, and we believe that the long-term reasonable profit margin of the leader of the amino acid industry in China may be between 5-10% cJQ short-term reduction pressure does not change the long-term trend to good, maintain the "increase in holdings" rating The company has Dinghui and Xintiantian two financial investors, currently still hold a total of 370 million shares, in recent years has maintained a gradual reduction of the trend; Despite short-term pressure to reduce holdings, the trend towards rapid expansion of the capital market has become more apparent in the after-market acquisition of Ipin At the same time, the company's main product prices are currently in the path of recovery, 15 years of performance flexibility is greater Assuming the issue is completed at the beginning of the 15th year, we expect the company to achieve net profit of RMB5211.5143 million in 14-16 years, and EPS is estimated to be RMB0.17.38.49, while the current share price corresponds to PE of 361613 times and PB 2.31.41.3 times The share price is still attractive and maintains an "overweight" rating cJQ risk tips: the price of amino acids of small varieties such as sucrose is affected by the supply cycle of the industry, the price of corn is volatile, and the approval and integration process of the Iipin acquisition is uncertain cJQ Event: cJQ Plum Bio announced the acquisition of 100% of the industry's third Ippin Bio at a cost of 3.82 billion yuan, of which 700 million yuan in cash and 660 million shares in the stock In addition, Meihua will also be targeted to issue no more than 214 million shares, to raise 1.04 billion yuan, intended to pay for the acquisition of Ipin Bio cash portion of the price, as well as Ipone Bio annual output of 200,000 tons of gastric feed additives project cJQ Review: cJQ Ispin is the third largest in the biofermentation industry, after the completion of the acquisition of Plum will be in the MSG and Susine sub-industry to obtain greater pricing power Ipin Bio is currently the third largest biological fermentation enterprise after Yufeng and Meihua, located in Yinchuan, Ningxia, with an annual output of 220,000 tons of MSG and glutamate, 50,000 tons of sucone, 370,000 tons of lysine production capacity At present, plum 13 years sales of MSG and glutamate 510,000 tons, sucone 160,000 tons, lysine 300,000 tons After the merger, Meihua Group will exceed 700,000 tons of MSG and glutamate, slightly less than the 1 million tons of The Ufeng Group, and the market share will reach 40%;cJQ MSG industry consolidation has basically completed the restoration of reasonable profits is a major trend, but the rise in prices is subject to the strategic intention of The Fung China's MSG industry currently has a market capacity of about 2 million tons, after the integration of CR2 has been close to 90%, the two major leaders through its complete industrial chain and huge capital investment constitute a certain moat, enjoy a clear cost advantage The remaining small and medium-sized enterprises are basically concentrated in Shandong and Henan and other places, in corn prices, coal and energy costs, labor costs, land sewage and industrial chain integrity of the disadvantage is very obvious, at present mainly rely on depreciation and local tax protection and other advantages in the barely survive At present, 8100 yuan / ton of MSG prices, Fengfeng, plum and Yipin can only earn small profits, other enterprises basically can not make a profit, and in the past MSG prices have been more than 10000 yuan Because MSG accounts for a very low proportion of consumer and downstream consumer spending, downstream consumption is not price sensitive, in the long run, MSG price elasticity is huge But in the short term, the 15-year price target for The Company is about 8400-8500 yuan/tonne (including tax), and the price of MSG is expected to stabilize upward in 15 years cJQ Plum has become the largest domestic sucone manufacturers, Susine will become the largest performance elasticity point in the short term The domestic production of Susine in 2013 was 212,000 tons, up 22.4% YoY, with plum blossoms and Ipin expected to account for 80-90% of this In addition to meeting a small amount of domestic demand, China's susine is mainly used for export, china's cumulative exports of Susine 158,000 tons in January-September, up 16% year-on-year The global market is about 400,000 tons, of which 13 years of production of miso, in addition to Germany's Evonik, the United States ADM, South Korea's CJ and so on The merger of Plum and Ipin will have an important impact on industry prices Recently due to strong international demand, some manufacturers have even stopped domestic quotations, prices also rose from about 12,000 / ton in August to the most recent 30,000 yuan / ton According to the current price, the ton profit will be more than 10,000 yuan, plum annual profit will be more than 2 billion yuan Susine is the company's largest short-term performance elasticity point However, in the long run, the total amount of sunine is small, compared with other amino acid products production process is not much different, other enterprises to transfer production and new production capacity is relatively easy;cJQ the short-term supply of lysine is relatively surplus, plum ipin competitive advantage is obvious In 2013, China's lysine production was 1.085 million tons, down 7.2% year-on-year In the first nine months of this year, China's cumulative export volume of lysine was 184,000 tons, up 45,000 tons or 32.8 percent year-on-year The main domestic manufacturers have plum, Shijie, Dentons, gold corn, plum blossoms, Iskin, Fengyuan, Chengfu, Dongxiao, Oriental Hope, etc , the company has occupied the leading position after the merger of Yipin The global market size of lysine is about 2.1-2.2 million tons, and there are also odorin (about 400,000 tons), CJ of Korea, ADM in the United States, Evonik of Germany, etc As both Meihua and Ipin have aggressively expanded their lysine capacity in recent years, resulting in overcapacity in the industry, falling prices and forced products to shift to international markets However, the main production capacity of Meihua and Yipin is located in Xinjiang, Ningxia and Chifeng, coal prices are low, than the northeast of Dacheng and Chengfu and other cost advantages are obvious Dentons Biochemical Amino Acids Division (mainly lysine and sucrose) had a gross margin of -23% and plums at 13%, a difference of 36 percentage points As a result, companies may also continue to expand capacity through cost advantages in the future, pushing Dentons and others out of the market At the same time, the rebound in pig and broiler prices will stimulate a 15-year recovery in the scale of farming, lysine as a feed additive demand will also increase cJQ Ibin's performance commitments have largely reflected the improvement of the company's existing business, the results exceeded expectations more dependent on plum's own business Ipin's net profit for 12-13 years was 110 million and -0.12 billion, respectively, and the 14-year January-July loss exceeded 80 million, and the net profit of 14-16 years was not less than 270,000 yuan, 3.3 billion yuan, respectively The company's past decline in profits is mainly due to the decline in MSG prices, in the near term, MSG prices have rebounded, sunine prices have soared to contribute to the profits of Iline In view of the uncertainty of the future price of Susine, the current performance commitment has basically reflected the synergies after the acquisition of Ipin We believe that the company's better-than-expected results will come more from the improvement in plum's own profits After the rebound in the price of Susine, the company's monthly profit has been close to 150 million yuan, if 15 years of MSG prices can have a further recovery, profits will be even greater Plum's own business has a large profit elasticity for 15 years In recent years, the net interest rate of miso is basically maintained at between 4-5%, but the end-of-life profit margin of the Amino Acid industry in Japan is low, and we believe that the long-term reasonable profit margin of the leader of the amino acid industry in China may be between 5-10% cJQ short-term reduction pressure does not change the long-term trend to good, maintain the "increase in holdings" rating The company has Dinghui and Xintiantian two financial investors, currently still hold a total of 370 million shares, in recent years has maintained a gradual reduction of the trend; Despite short-term pressure to reduce holdings, the trend towards rapid expansion of the capital market has become more apparent in the after-market acquisition of Ipin At the same time, the company's main product prices are currently in the path of recovery, 15 years of performance flexibility is greater Assuming the issue is completed at the beginning of the 15th year, we expect the company to achieve net profit of RMB5211.5143 million in 14-16 years, and EPS is estimated to be RMB0.17.38.49, while the current share price corresponds to PE of 361613 times and PB 2.31.41.3 times The share price is still attractive and maintains an "overweight" rating cJQ risk tips: the price of amino acids of small varieties such as sucrose is affected by the supply cycle of the industry, the price of corn is volatile, and the approval and integration process of the Iipin acquisition is uncertain cJQ .