As an indispensable part of the agricultural industrial structure, the status of animal husbandry in the operation of China’s market economy has been improving year by year. With the development of modern animal husbandry technology and the increase in consumption demand for meat, eggs and milk, the total output value of China’s animal husbandry industry has remained around 3 trillion yuan since 2016, and the output value exceeded 4 trillion yuan for the first time in 2020, an increase of nearly 191 times over 20.93 billion yuan in 1978. Among them, pork, as the first major category of meat, eggs and milk consumption of Chinese residents, has a leading position in meat and poultry eggs all year round.
As the upstream link of the aquaculture industry, China’s feed industry has maintained rapid development in the past few decades, and its current production and sales have leapt to the first place in the world. It is reported that the feed industry can be divided into four sub-industries, including feed additives, feed raw materials, feed processing and feed processing machinery manufacturing. Among them, feed additives are the core of compound feed, together with energy feed and protein feed, constitute the three important components of compound feed, in addition, feed additives are also regarded as the core of the feed industry system; Feed raw materials refer to feed substances derived from animals, plants, microorganisms or minerals that are used to process feed but are not feed additives.
Zhitong Financial App learned that a few days ago, Shanghai Meinong Biotechnology Co., Ltd. (hereinafter referred to as “Meinong Biotechnology”) submitted a prospectus, and the company intends to land on the Growth Enterprise Market. According to the prospectus, Meinong Biotech is a company specializing in the research and development, production and sales of feed additives and enzymatic protein hydrolysis feed raw materials. In terms of products, the company’s products are mainly used for pigs, and downstream customers include feed production enterprises, breeding enterprises and distributors.
The sales volume of major products stimulated the continuous high growth of performance
In terms of performance, in recent years, Meinong Biotech can be described as stepping on the fast track of rapid growth. From 2018 to the first half of 2020, the company achieved revenue of 266 million yuan, 280 million yuan and 421 million yuan, respectively, corresponding to a compound growth rate of 25.78%; In the first half of 2021, the company achieved revenue of 248 million yuan, a year-on-year increase of 63.97%.
From the perspective of splitting the revenue structure, the revenue source of Meinong Biotech can be roughly divided into two parts: the main business and other businesses. During the period, the proportion of main business income was more than 95%. Further subdivided, the company’s main business includes functional feed additives, nutritional feed additives, enzymatic protein feed raw materials and other products.
Among them, functional feed additives are the company’s main source of income, and the revenue realized during the period was 189 million yuan, 205 million yuan, 296 million yuan and 154 million yuan, accounting for 74.25%, 73.86%, 70.75% and 62.41% of the company’s main business income.
In terms of specific varieties, the functional feed additives of Meinong Bio include sweeteners, acidity regulators, flavor agents and others. During the period, the sales volume of the company’s above varieties has increased significantly. Among them, the sales volume of sweeteners increased from 2039.11 tons in 2018 to 3227.51 tons in 2020, acidity regulator increased from 5845.41 tons to 9536.62 tons, and flavor agents increased from 2153.08 tons to 2574.08 tons.
Although the sales unit price of the above-mentioned functional feed additives has declined to varying degrees during the same period, thanks to the sharp increase in sales, the revenue of this business segment of the company has shown a year-on-year upward trend.
As a segment with a rapid growth rate in recent years, nutritional feed additives have increased their revenue from 11.8525 million yuan in 2018 to 48.3251 million yuan, accounting for 4.65% to 11.57%. In the first six months of 2021, the business achieved revenue of 38.6737 million yuan, accounting for 15.7% of the main business income.
From the perspective of specific categories, the company’s nutritional feed additives include rumen vitamins, slow-release nitrogen sources, coated zinc oxide, and rumen amino acids. Item by item, in 2019, the sales of rumen vitamins, slow-release nitrogen sources, rumen amino acids and other products increased significantly, of which the increase rate of rumen vitamins was as high as 343.16%. In 2020, the sales volume of rumen vitamins, slow-release nitrogen sources and rumen amino acids still maintained rapid growth, but the increase rate became smaller; Coated zinc oxide was introduced to the market at the end of 2019 and rapidly increased in 2020. The sales volume of each product has blossomed, which directly stimulates the company’s nutritional feed additives business revenue to continue to rise.
During the reporting period, the revenue of enzymatic protein feed raw materials of Meinong Biotech was 53.8604 million yuan, 49.6522 million yuan, 54.2156 million yuan and 31.3305 million yuan respectively, and the sales scale remained stable on the whole, and the proportion decreased year by year. As of the end of June 2021, the proportion of this sector in the company’s main business has shrunk from more than 20% in 2018 to 12.72%.
In contrast, the profit performance of Meinong Biologics during the period was 24.1304 million yuan, 34.3657 million yuan, 66.714 million yuan and 37.3318 million yuan respectively, which also increased in the same direction as the company’s revenue. During the same period, the company’s gross profit margin was 35%, 38.63%, 38.7% and 34.51%, respectively.
It can be seen that the gross profit margin of Meinong Biotech in the first half of 2021 has declined significantly, and the gross profit margin of the company’s main business functional feed additives, nutritional feed additives and enzymatic protein feed raw materials decreased by 8.47%, 20.46% and 4.1% respectively.
Zhitong Financial App learned that the gross profit margin of the main businesses of Meinong Biotechnology in the first half of 2021 all declined, mainly due to the increase in the price of raw material procurement. It was disclosed that the prices of the company’s main raw materials increased to varying degrees, among which, the prices of stearic acid, phosphoric acid and ethyl vanillin, which increased the most, increased by 27.79%, 12.42% and 15.92% year-on-year.
Can the prosperity continue under the changing industry situation?
From the perspective of the industry, as mentioned earlier, Meinong Biotech’s products are mainly in the two industries of feed additives and enzymatic protein feed raw materials. Therefore, in order to judge the sustainability of a company’s performance growth, it is necessary to first have a general understanding of the development status of the above two sub-industries.
First of all, look at the feed additive industry, as the core of the feed industry, feed additives have achieved rapid development in recent years. Data show that from 2011 to 2020, the total output of feed additives in China increased from 6.292 million tons to 13.988 million tons, and the scale of the industry continued to expand.
Specific to Meinong Biotechnology, the company’s main feed additive products belong to the functional feed additive industry and the nutritional feed additive industry, of which the latter accounts for more than ninety percent of the total output of feed additives. It is also understood that the nutritional feed additives of Meinong Biotechnology are mainly used in ruminant feed such as cattle and sheep, and the production of ruminant feed has been steadily increasing in the past decade, and this trend is expected to continue in the future.
In terms of functional feed additives, the company’s sweeteners and flavors are all flavoring and inducing food quality additives in functional feed additives, and their main functions are to improve feed palatability, enhance animal appetite and increase feed intake. According to the disclosure, this kind of additives of Meinong Biotech are mainly used in pig feed, so the demand is directly related to the pig inventory; However, it should be pointed out that because the pig inventory is at a low level will promote the pig price to rise, in order to promote the growth of pigs and enhance their disease resistance, breeding enterprises are often more willing to use high-quality feed additives, based on this, such as sweeteners, flavor agents and other pig feed additives fluctuation range than pig inventory fluctuation range is smaller.
Acidity regulator is the fastest growing product among Meinong biological functional feed additives in recent years. Especially since 2018, acidity regulators have become more and more popular among aquaculture enterprises. There are two reasons behind this: first, affected by “African swine fever”, the demand for acidity regulators in breeding enterprises to increase breeding sales has increased; Second, the “Pilot Plan for Mitigating the Use of Veterinary Antimicrobials (2018-2021)” formulated in 2018 restricts the use of antibiotic feed additives, and the market recognition of acidity regulators as mainstream “antibiotic” products continues to rise. The upward trend of the industry has laid an important foundation for the company’s product popularity.
In contrast, according to the “National Feed Industry “Thirteenth Five-Year Plan” Development Plan, in 2015, the total consumption of protein feed raw materials in the country was 67.5 million tons, and the import dependence exceeded 80%, an increase of 10% over 2010. From 2015 to 2020, China’s demand for protein feed raw materials is expected to increase by an average of 100-1.25 million tons per year, and it is expected that the national demand will reach 72.50-73.75 million tons in 2020, and the demand will maintain a high growth level.
Similar to the acidity regulator mentioned above, Meinong Bio’s enzymatic hydrolysis plant protein as a high-quality protein feed raw material is gradually accepted by the market under the background of “anti-anti”. In the future, with the implementation of the comprehensive “anti-resistance” policy at the feed end, the market size of enzymatic hydrolysis of plant protein is expected to continue to grow.
In this sprint to the ChiNext board, Meinong Biotech also plans to use the funds raised mainly for the “new feed related product production project”, which will add 24,000 tons/year of acidity regulator and 23,000 tons/year of nutritional feed additives for ruminants after the completion of the project.
Zhitong Financial App believes that from the perspective of the company’s fundraising purpose, it is not difficult to see that Meinong Biotech intends to expand its circle of competence. On the one hand, acidity regulators, as “antibiotic” products, are in line with the direction encouraged by national policies, and conform to the development trend of “green and antibiotic-free” industries, which is also expected to inject more momentum into the sustainability of the company’s performance growth; On the other hand, expanding the scale of nutritional feed additives for ruminants can reduce the impact of the “pig cycle” on the company’s performance to a certain extent, and have a positive impact on the company’s future performance.
Although the prospects are promising, considering that the cost of raw materials in the company’s industry accounts for a relatively large proportion of the cost of the main business, the current pressure of upstream raw material price increases still exists, which may continue to disrupt the company’s earnings in the future; At the same time, the cyclical fluctuation risk of pig breeding will also affect the feed industry, and the stability of the company’s performance in the medium and long term still needs to be observed.