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1、 The leading position of Zhiti is stable, and its business performance continues to increase

Recently, Chenguang Biology (16.450, – 0.45, – 2.66%) which is the leader of Zhiti, released the performance express of 2021. The annual operating revenue exceeded 4.8 billion yuan, with a year-on-year increase of 24.48%, and the net profit attributable to the parent company was 354 million yuan, with a year-on-year increase of 32.21%; The deduction of non parent company profit was 293 million yuan, with a year-on-year increase of 29.98%.

In the past year, the overseas epidemic situation was severe, the domestic epidemic continued to spread, the prices of industrial products and agricultural products (6.190, – 0.05, – 0.80%) rose sharply, and the consumption was obviously under pressure due to the repeated disturbance of the epidemic. However, Chenguang biological products are widely used in food and beverage, medicine, health care products and other fields. They are essential consumer goods, and the market demand is relatively stable. With the solid layout of the whole industrial chain over the past years, Chenguang biology has actively guaranteed the needs of downstream customers, further improved the market share and realized the continuous high growth of business performance.

Since 2015, the compound growth rate of the company’s operating revenue has been about 25%, and the compound growth rate of net profit has been about 30%. The three main products have ranked first in the world, the product echelon has been continuously enriched, the operating performance has increased steadily, the core competence has been continuously enhanced, and high-quality development has been achieved.

2、 The main varieties have made further achievements, and the product matrix has gradually developed

As can be seen from the operating results of various businesses, Chenguang biological products have a rich structure, the main varieties have developed steadily, and new products have accelerated.

According to the annual performance forecast and express report of Chenguang biology, “in 2021, the sales volume of its main variety chili red will be more than 8000 tons, with a year-on-year increase of about 12%; the sales volume of chili essence will be more than 1100 tons, and the sales revenue will reach a new high.” The performance of the three main varieties is stable. On the premise that the market share has reached the first in the world, they still achieve rapid growth and continue to ensure the steady growth of the company’s performance.

“The sales revenue of spices products exceeded 110 million yuan, and the sales volume of pepper extract, ginger extract, cumin extract and other products increased significantly, further improving the market share; new achievements were made in the market development of nutritional products, and many products reached strategic cooperation with well-known end customers such as svisch, naskayer and amendment pharmaceutical, and the sales momentum continued to improve. The annual sales revenue of Stevia products was nearly 200 million yuan, achieving new growth.” “Breakthrough”. The company’s second tier products have obvious market advantages and strong growth momentum. The products of the second echelon have formed a certain cluster effect, and more varieties ranking first in the world will be cultivated in the future.

In 2021, the company Guiyang Chenguang initiated a 5000L * 3 supercritical production line and put it into use, mainly producing spices products; The transformation and upgrading of nutrition and medicinal workshop and stevia production line have been completed, so that the production capacity and automation degree have been improved. With the continuous improvement of the company’s production capacity layout, the second echelon products will accelerate and increase in volume soon.

3、 Core barriers have been continuously strengthened, and R & D has enabled product innovation

Relying on the competitive advantage of leading cost, the company has successfully created one variety after another in the forefront of the world. The core barrier of cost leadership lies in high product yield and strong ability to control raw materials.

The company continues to focus on the process development and improvement of key products, improve product stability, improve yield and reduce consumption. The yield of main products has been 5% – 10% higher than that of peers, and the market competitive advantage is obvious. In addition, in 2021, the company began to strengthen its efforts in the application and development of differentiated and customized products. New products such as special pigment for conditioning meat, special pigment for hotpot bottom, high hemp pepper seasoning oil and so on have been introduced to the market one after another. Based on the high market share occupied by the standardized specifications of core products, we will vigorously cultivate high-value differentiated and customized products and enhance customer stickiness, which will further strengthen the core barriers of the company. In 2021, the company was granted 83 patents, and its strong R & D ability led the whole industry, providing strong support for the long-term development of the company.

Chenguang’s raw material cost accounts for about 95% of the product cost. The ability to control raw materials is also one of the key barriers in the industry. Chenguang has set up raw material bases in Xinjiang, Yunnan, India, Zambia and other places. The Zambia base is the key layout for the company to maintain the advantage of raw material resources in the next 10-20 years. According to its official website, “the company began to invest in Zambia in 2016. Zambia’s raw material base was rapidly promoted in 2021. The pepper planting area of sinazonggui farm reached 30000 Mu and the marigold planting area of qifuxing farm reached 10000 mu, accumulating energy for the future development of the company.” 2021 is the first year of Chenguang’s large-scale planting in Zambia, which means that the company has successfully run through all links of large-scale planting in Zambia. At this stage, it is difficult for the domestic marigold planting area to increase significantly, and the industry is facing the dilemma that the supply of lutein raw materials is difficult to match the demand growth. By setting up marigold planting base and supporting production line in Zambia, Chenguang takes the lead in breaking through the restriction of raw material supply, and the main variety lutein will have more advantages. At present, the company has more than 100000 mu of land in Zambia. With the continuous development of planting base, the ability to control upstream raw materials is enhanced, and the company’s cost reduction ability will open up imagination space for improving profitability.

4、 The development logic is steady and clear, and the prospect of 10 billion yuan in the future can be expected

The development logic of the company is clear, and a three-step development strategy has been formulated: the first step is to achieve the first production and sales volume of chili red in the world, and the company has been listed. This step has been realized and is still expanding its product advantages; The second step is to make ten or so of the world’s first or leading products and build the world’s natural plant extract industry base, which is gradually being realized; The third step is to expand and strengthen large health industries such as health care products and traditional Chinese medicine extraction to contribute to human health. At present, it is in the early layout stage.

At this stage, the company is in the second step of the three-step strategy, that is, giving full play to the company’s low-cost advantages, horizontally expanding ten of the world’s largest single products, and constantly opening the ceiling of the company’s growth. At present, the market share of the three large single products has remained the first in the world for many years, with strong industry influence and high growth certainty, which is the basic plate for the stable growth of the company’s performance; Among the echelon products, nutrition products and spices products have larger market space and stronger profitability, which will drive the overall performance growth. The continuous optimization of product structure will also improve the profitability of the company.

Under the guidance of the strategy of becoming the first ten varieties in the world and relying on the continuously improved product echelon, Chenguang biology is expected to maintain a compound growth rate of 25% of its revenue in the past five years, so as to achieve 10 billion revenue during the 14th Five Year Plan period.