Hicon Network Technology(Shandong) (SZ:301262)2025-05-13 15:19Summary of the Conference Call for Yizhi Konjac Company Overview - Yizhi Konjac primarily engages in deep processing of konjac, with three main product lines: konjac powder, konjac food, and konjac beauty products. Konjac powder constitutes 70% of the revenue in 2024, with sales exceeding 6,000 tons and a global market share of 12%, leading the market [2][3][4]. Industry Insights - The konjac food segment, including snacks and tea additives, accounts for 28% of revenue, with rapid growth driven by health trends, particularly the "konjac crystal ball" favored by brands like Mixue Ice City [2][4]. - The konjac industry in China consists of four main segments: planting, initial processing, deep processing, and application. The deep processing segment is primarily focused on food but also extends to chemical, skincare, and medical applications [12]. Financial Performance and Projections - Yizhi Konjac is expected to benefit from rising raw material prices and overseas replenishment demand, projecting a revenue growth of over 15% in 2025, with potential for over 50% growth if external orders are secured [2][5]. - Forecasted net profits for 2025, 2026, and 2027 are 98 million, 126 million, and 174 million yuan respectively, with a compound annual growth rate exceeding 30% [2][6]. - The company's current valuation corresponds to a PE ratio of approximately 48 for 2025, which is above historical averages [6][23]. Cost Structure and Profitability - The gross margin is influenced by raw material prices, inventory levels, and procurement strategies. Historically, the gross margin has improved significantly, with a notable increase of nearly 4 percentage points in 2024 [8][9]. - The company has seen a decrease in expense ratios from 22.7% in 2014 to 10.2% in 2020, but this has increased due to expansion efforts [9]. Market Dynamics - The konjac raw material prices are primarily driven by demand, with expectations for prices to remain high or increase further in 2025 due to a projected 20% growth in downstream applications [13][14]. - China is a major producer of konjac, with annual production increases of 10%-20%. However, supply constraints due to seed shortages and adverse weather conditions are anticipated [14][16]. Competitive Landscape - Major competitors in the konjac market include Yizhi Konjac, Yizhi Magic, and others, with leading companies enhancing customer loyalty through vertical and horizontal integration [17][18]. - The company has established strong procurement relationships and a proprietary technology system, allowing for high-value konjac micro-powder production with a gross margin of 20%-25% [16]. Growth Drivers - Future growth is expected to stem from advancements in blending technology in mature markets and the exploration of new applications in pet food and health products [18][22]. - The company is positioned to capitalize on the rapid growth of the konjac snack and tea additive markets, benefiting from integrated service advantages and strong raw material control [18][21]. Overall Outlook - The company is anticipated to benefit from both supply and demand dynamics in the short term, with a strong potential for long-term growth driven by industry upgrades and increased market penetration [24].