Skystar Bio-Pharmaceutical (NASDAQ: SKBI), is among China’s top brands that provides animal health and wellness products in individual packages. The Company invents and manufactures vaccines, Western medicines, probiotics, nutritional supplements, and traditional Chinese medicines. With a diverse offering of over 100 different licensed products, the Company has developed a strong foothold in China’s 29 agricultural provinces.
As it stands, the Company has approval from the Chinese Ministry of Agriculture to manufacture and distribute veterinary drugs. This is a huge barrier to enter for new competitors and gives Skystar a huge head start in gaining a massive market share. With the Company having over 100 drugs and formulas in their portfolio already, Skystar saw $42.5M in revenue in the 2013 financial year. It is important to note that they are either pending approval on or researching many more products. Skystar does a lot of their research and development in-house, in order to cut the costs of hiring an external laboratory to perform the studies.
Skystar has seen its profit margin increase by a CAGR of 25% from 2006 to 2013, meaning that the Company has been seeing solid fundamental growth over recent years. According to China’s government, by 2015, China’s husbandry output value will account for 36% of the total output value of agriculture, forestry, animal husbandry, and fisheries. In 2010, this output only reached 30%. As can be seen, animal husbandry is growing very rapidly in China, and Skystar is positioning themselves to take advantage of further growth opportunities. They’re currently working to finish improvements and retooling in their Kunshun Manufacturing Campus, which could help to increase the Company’s output in order to help them keep up with growing demand. With increased safety standards due to concerns about animal products coming from China, the annual production value of veterinary medicine grew at a CAGR of 15%. This shift towards safety has put Skystar in the middle of a great growth opportunity.
The Company currently has over 4,000 customers; including 2,893 distributors and 1,122 direct customers, 360 of which are physical stores. Those 360 physical storefronts have exclusivity agreements with Skystar. With an increasingly large emphasis being placed on animal health and wellness in China, Skystar has begun ramping up their promotional activities within the 29 agricultural provinces that they operate in. They have been sending sales teams to agricultural areas to promote awareness of animal healthcare. They’re actively working to educate agricultural workers about the importance of vaccinating their livestock, supplementing their nutrition, and using Western medicine to cure their health afflictions. Increasing the Company’s customer base is a crucial step towards the continued growth of Skystar’s profit margins and revenue streams.
The directors and officers of Skystar have invested heavily into the Company in order to better align their personal interests with those of the public shareholders. The leadership team of the Company is highly experienced in running successful businesses. CEO Weibing Lu has previously founded and managed several other companies, including another bio-pharmaceutical company, Xian Tianxing Bio-Pharmaceutical Co. CFO Bing Mei has over 20 years of industry experience in fields such as technology services, information technology, and industrial manufacturing. With such experienced and invested leaders, Skystar seems to be well on the path to continued growth.
