We initiate coverage on Zixin Group (SGX:42W) with a BUY recommendation and a DCF-TP of S$0.050. We expect earnings to at least double to RMB 30.9mil. Zixin is well-positioned to capitalize on new facilities and government support to double production capacity by FY25e.
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The government is providing further policy support to the industry, including allocating land and subsidising facilities. Zixin is partnering with CITIC Construction to replicate the entire sweet potato value chain in Hainan Province. Zixin is also expanding its revenue stream by converting agricultural waste into animal feed, which we anticipate will be a revenue catalyst, with the first batch expected to generate ~RMB 1mil in 4Q FY25e.
Company Background
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Revenue drivers include fresh sweet potato sales (18% of FY24 revenue) and processed snack products under its house and OEM brands (82%). Total volume was 31,506 tonnes in FY24 (+63.5% y-o-y), recovering from COVID-related impacts.
The production base is located in Liancheng County, Fujian Province, China.
Investment Highlights
Growing supply of sweet potatoes.
Read more at SGinvestors.io.
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