Investment Thesis

Jonjee Hi-Tech is a Leading Company in the Condiment Industry of China. Condiment industry is encouraged by the Chinese government, and enjoys huge market demand and broad development prospects. In the future, it will continue to benefit from the rise of the sales structure caused by the sales upgrading. With strong brand advantage, continuous expansion of production scale and channels, the company will keep consolidating its position in the industry, and its operating efficiency will still be on a steady growing trend. We expected diluted EPS of the Company to RMB 0.64 and 0.86 of 2016/2017. And we accordingly gave the target price to 30.1, respectively 35x P/E for 2018. “Accumulate” rating.

Company profile: Leading Company in the Condiment Industry

Jonjee Hi-Tech is the first listed company among the 53 state-level high-tech zones in China, and also the first listed company in Zhongshan City. The company was established in 1993, and listed on the main board of Shanghai Stock Exchange in 1995. Jonjee Hi-Tech owns Guangdong Meiweixian Flavoring Foods Co., Ltd., Guangdong Zhonghui Hechuang Real Estate Co., Ltd., Jonjee Precision Machinery Co., Ltd. and other subsidiaries, of which the condiment business occupies the largest proportion, and accounts for about 95% of the total revenue and gross profit contributions.

The company has a long history of producing soy sauce. Originated from Xiangshan Sauce Garden in the late Qing Dynasty and the early Republic of China, the company has won the title of “The Old Chinese Brand” and other national honors. The main products include the condiments (including soy sauce, chicken powder, oyster sauce, fermented bean curd, sauces, monosodium glutamate, vinegar, chicken bouillon and cooking wine), cooking oil and canned foods. The company is involved in production and sales of more than 100 varieties in 11 categories. The company is leading in the production technology in China, and the current overall production capacity exceeds 400,000 tons per year, of which sales of soy sauce account for nearly 70% of the total condiment sales. In addition, the production scale and market share rank second in China, only following Haitian (2.12 million tons); the sales of chicken powder account for 10-15% while the sales of other condiments account for 10-15%.