SIRIO(300791) 长江证券·2024-05-27 02:32Company Rating - The report assigns a "Buy" rating to Xianle Health (300791 SZ) with a target price of 39 71 RMB per share [23][30] Core Views - Xianle Health is a leading player in China's health supplement contract manufacturing industry with strong capabilities in product matrix innovation and global production and sales [23][30] - The company has transitioned from a pharmaceutical background to a global health supplement manufacturer with a focus on R&D and lean production [7][30] - The health supplement industry's demand for contract manufacturing is increasing driven by the rapid iteration of downstream brands and the need for innovative products [22][30] - Xianle Health's overseas expansion through acquisitions in Germany and the US has enhanced its global supply chain and profitability [8][25] Industry Overview - China's health supplement market reached 2253 billion RMB in 2023 with a CAGR of 8 5% over the past decade [38] - The e-commerce channel accounted for 56% of VDS retail sales in 2023 up from 14% in 2013 [22] - The contract manufacturing market for health supplements in China was estimated at 22 53 billion RMB in 2023 with Xianle Health holding an 8 2% market share [22] Company Operations - Xianle Health's revenue from contract manufacturing accounted for 98 9% of total revenue in 2023 [122] - The company has a comprehensive product matrix with soft capsules contributing 43% of revenue in 2023 [30][96] - Xianle Health's production capacity for soft capsules tablets powders and soft candies increased by 2 5x 2 7x 6 0x and 21 1x respectively from 2016 to 2023 [8] Financial Performance - Xianle Health achieved revenue of 3 58 billion RMB and net profit of 281 million RMB in 2023 [82] - The company's revenue and net profit grew at a CAGR of 22 72% and 18 5% respectively from 2019 to 2023 [82] - Xianle Health's ROE was 11% in 2023 with room for improvement in net profit margin [44] Overseas Expansion - Xianle Health acquired Ayanda in Germany in 2016 and Best Formulations in the US in 2023 to expand its global production capacity [8][152] - The company's overseas revenue accounted for 48% of total revenue in 2023 [150] - Ayanda's revenue and net profit margin improved significantly after the acquisition [133] R&D and Innovation - Xianle Health has 115 registered and 237 filed health supplement approvals as of 2023 [59] - The company's R&D expenses accounted for approximately 3% of revenue in recent years [59] - Xianle Health has developed innovative dosage forms such as Plantegrity® plant-based soft capsules [102] Employee Incentives - Xianle Health launched a new equity incentive plan in Q4 2023 with revenue targets of 4 31 billion RMB 4 93 billion RMB and 5 57 billion RMB for 2024 2025 and 2026 respectively [10] - The employee stock ownership plan covers 18 key personnel including overseas business leaders [116] Market Position - Xianle Health is the leading contract manufacturer in China's health supplement industry with a market share of 8 21% in 2023 [22] - The company's customer concentration has decreased with CR5 dropping from 35 1% in 2016 to 22 8% in 2023 [37][63]