Xinjiang Tianrun Dairy (SH:600419) Huajin Securities·2024-10-23 14:43Investment Rating - The report assigns an investment rating of AA-/AA- to the company and its convertible bond issuance [1]. Core Insights - The company is a key player in the agricultural industrialization sector, specifically in dairy processing, and has a significant market presence in the Xinjiang region [11][15]. - The convertible bond issuance is sized at 10.5 billion yuan with a maturity of 6 years, featuring a conversion price of 8.43 yuan and a compensation interest rate of 10.9%, indicating a favorable investment opportunity [1][7]. - The company has experienced a stock price decline of 26.32% year-to-date, underperforming the industry index which declined by 3.28% [24]. Summary by Sections Convertible Bond Analysis - The issuance size of the Tianrun convertible bond is 10.5 billion yuan, with a 6-year term and an AA-/AA- rating [1][7]. - The conversion price is set at 8.43 yuan, with a compensation interest rate of 10.9%, which is considered high [1][7]. - The pure bond value is calculated at 93.29 yuan, corresponding to a YTM of 2.81%, indicating sufficient debt protection [1][7]. Subscription Rate Analysis - The top ten shareholders hold a combined 43.67% of the company's shares, indicating a concentrated ownership structure [10]. - Assuming an online subscription amount of 750 million households with a maximum subscription limit of 100 million yuan per household, the expected subscription rate is approximately 0.0049% [10]. Company Overview - The company is primarily engaged in the research, production, and sales of dairy products and beverages, and is recognized as a national key leading enterprise in agricultural industrialization [11][15]. - As of June 30, 2024, the company has 26 large-scale breeding farms with approximately 57,300 cattle, ensuring a stable supply of fresh milk [11][15]. - The company has a comprehensive industry chain, integrating dairy farming, product research and development, production, and sales [11][15]. Industry Analysis - The dairy processing industry is characterized by its integration with dairy farming and consumer markets, showing stable growth trends [15][16]. - Global dairy production has been on the rise, with liquid milk production increasing from 56.5 million tons in 2014 to 64.2 million tons in 2020 [15][16]. - The company is positioned to benefit from the growing demand for dairy products driven by rising living standards and economic growth in China [16]. Financial Analysis - For the first half of 2024, the company reported revenues of 1.443 billion yuan, a year-on-year increase of 3.89%, but a net profit decline of 122.18% due to significant disposal losses and increased financial expenses [19][20]. - The company's liquidity ratios have shown a downward trend, with a current ratio of 0.79 and a quick ratio of 0.49 as of mid-2024 [22]. - The company has maintained a stable financial condition without defaults, with a debt-to-asset ratio of 56.19% as of mid-2024 [20][22]. Valuation Performance - As of October 22, 2024, the company's price-to-book ratio (PB) is 1.17, below the industry average, indicating potential for valuation recovery [24]. - The company's return on equity (ROE) stands at -1.18%, which is lower than the industry average [24]. - The stock has underperformed the industry index, with a year-to-date decline of 26.32% compared to the industry’s 3.28% drop [24]. Fundraising Project Analysis - The company plans to use the raised funds for a 200,000-ton dairy processing project, with an expected internal rate of return of 15.80% and a payback period of 7.31 years [28][30]. - Additionally, 27.77 million yuan will be allocated to supplement working capital to support ongoing business expansion [28][30].