Plum Bio: MSG business expected to bottom out rebound

Event: Recently, we have conducted field research on Plum Creatures (8.13, -0.020, -0.25%) (600873.SH), and have conducted a full exchange with the company's secretaryOur main views on the company are as follows:Z57MSG and glutamate business into the price increase channelZ57
From the industry chain of MSG, upstream corn and other raw materials prices have risen steadily, downstream demand is relatively stable, it is difficult to drive the rapid development of the industry by upstream and downstream;Z57
Capacity phase-out acceleratedDomestic MSG industry backward production capacity of the elimination of increasing effortsUnder the high pressure of the policy since 2010 began the third round of MSG industry phase-out integration, only 10 to 13 years of MSG production capacity phase-out reached 750,000 tons, involving MSG production enterprises to phase out the scale of production capacity is also growingBy 14 years to eliminate backward production capacity list has no MSG production enterprises, indicating that the industry supply and demand pattern is gradually stabilizingZ57
Plum merger and acquisition of Ipin, the industry oligarch pattern formedAfter four reductions in 2010-2013 (during which 750,000 tons of production capacity was eliminated), domestic MSG production capacity was reduced to about 2.67 million tons, accounting for more than 70% of global production capacity; If the successful completion of the merger and acquisition of Ipin, plum biological market bargaining power will be greatly improved, the market will enter the double oligopoly situation, MSG price increase resistance will be greatly reduced Z57
　　The lysine business is facing industry reintegration Z57
　　Due to the rapid expansion of production capacity, lysine is currently in the state of overall loss of the industry, the industry start rate of less than 60%; Z57
　　The current situation on plum biology has two opportunities: First, "stop production and integration" will become the norm in the next few years, large enterprises rely on cost advantages to benefit from increasing market share; Second, as the domestic industry leader Dentons biochemical due to management, location and other factors, serious losses, coupled with its capital strength is not strong, weak financing capacity, high debt ratio, there is bankruptcy risk; Z57
　　The company dabbled in the pharmaceutical sector to create new growth poles Z57
　　Extended industrial chain: test water medicine plate In order to enhance the company's overall ability to resist risks, in 2014 the company completed the acquisition of 51% of Guangsheng Pharmaceuticals, As a leading domestic hollow capsule production enterprises, with the company's current production of Prundo sugar project can be well combined; In the future, the company will use this as a platform for product and business integration, and on the existing basis to introduce the industry's outstanding team to build listed companies in the pharmaceutical business sector The cut-in of the pharmaceutical sector helps companies hedge against potential risks in their traditional businessand and open up new growth poles Z57
　　Recent share price catalyst: MSG price increase trend confirmation, industry integration new progress Risk factors: The timing of Thepin's litigation may affect the acquisition process, with the pace of industry consolidation expected to be lower than expected Z57 Event: Recently, we have conducted field research on plum creatures (8.13, -0.020, -0.25%) (600873.SH) and have had a full exchange with the company's directors Our main views on the company are as follows: Z57 MSG and glutamate business into the price increase channel Z57
　　From the industry chain of MSG, upstream corn and other raw materials prices have risen steadily, downstream demand is relatively stable, it is difficult to drive the rapid development of the industry by upstream and downstream; Z57
　　Capacity phase-out accelerated Domestic MSG industry backward production capacity of the elimination of increasing efforts Under the high pressure of the policy since 2010 began the third round of MSG industry phase-out integration, only 10 to 13 years of MSG production capacity phase-out reached 750,000 tons, involving MSG production enterprises to phase out the scale of production capacity is also growing By 14 years to eliminate backward production capacity list has no MSG production enterprises, indicating that the industry supply and demand pattern is gradually stabilizing Z57
　　Plum merger and acquisition of Ipin, the industry oligarch pattern formed After four reductions in 2010-2013 (during which 750,000 tons of production capacity was eliminated), domestic MSG production capacity was reduced to about 2.67 million tons, accounting for more than 70% of global production capacity; If the successful completion of the merger and acquisition of Ipin, plum biological market bargaining power will be greatly improved, the market will enter the double oligopoly situation, MSG price increase resistance will be greatly reduced Z57
　　The lysine business is facing industry reintegration Z57
　　Due to the rapid expansion of production capacity, lysine is currently in the state of overall loss of the industry, the industry start rate of less than 60%; Z57
　　The current situation on plum biology has two opportunities: First, "stop production and integration" will become the norm in the next few years, large enterprises rely on cost advantages to benefit from increasing market share; Second, as the domestic industry leader Dentons biochemical due to management, location and other factors, serious losses, coupled with its capital strength is not strong, weak financing capacity, high debt ratio, there is bankruptcy risk; Z57
　　The company dabbled in the pharmaceutical sector to create new growth poles Z57
　　Extended industrial chain: test water medicine plate In order to enhance the company's overall ability to resist risks, in 2014 the company completed the acquisition of 51% of Guangsheng Pharmaceuticals, As a leading domestic hollow capsule production enterprises, with the company's current production of Prundo sugar project can be well combined; In the future, the company will use this as a platform for product and business integration, and on the existing basis to introduce the industry's outstanding team to build listed companies in the pharmaceutical business sector The cut-in of the pharmaceutical sector helps companies hedge against potential risks in their traditional businessand and open up new growth poles Z57
　　Recent share price catalyst: MSG price increase trend confirmation, industry integration new progress Risk factors: The timing of Thepin's litigation may affect the acquisition process, with the pace of industry consolidation expected to be lower than expected Z57
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