Food: an underestimated driver of a healthy lifestyle In Part I, we identified dietary changes as a critical cause of the rise in the prevalence of chronic disease in China in the past 30 years. If an unhealthy diet has such a serious negative effect on health, then a healthy diet should work conversely, i.e. benefit health. While the importance of food is well understood, we think the real power of food (both positive and negative) remains underestimated. Due to growing health issues and health awareness, we expect the trend of proactively following a healthy diet to accelerate, leading to investment opportunities. Animal-based diet: the facts you need to know The "China Study" (a comprehensive analysis of diet, lifestyles and mortality) and a landmark report by the World Cancer Research Fund (on the connections between various foods and cancer) both suggest a strong link between an animal-based diet and chronic disease. Our analysis of protein intake (both animal and plant-based protein) and the prevalence of chronic disease around the world also supported the relationship. The latest scientific studies revealed the various mechanisms of how an animal-based diet causes health issues. An optimal diet: three guidelines Looking at the evolution of dietary guidelines from around the world, we note the benefits of a plant-based diet are increasingly being recognised. Our review of the latest scientific research supports this. Therefore we think an optimal diet should follow three guidelines: 1) largely plant-based: 2) eat a variety of natural foods; and 3) eat less. According to the latest research, most nutrition-related concerns (eg, protein deficiency) of a plant-based diet are overdone. Initiate coverage of Shandong Head and Chenguang Biotech with Buy ratings Shandong Head and Chenguang Biotech are exposed to the above theme. The former is a leading manufacturer of cellulose ether (CE) and vegetarian capsules (VC) and the latter is a leading plant extract producer. We believe Head is well positioned in the VC market which uses CE as a primary raw material. Head has also tapped the China plant-based meat (PBM) market; at 0.8x 2022E PEG, we think the potential of VC and PBM has not been fully priced in. We expect Chenguang to replicate its success in Paprika Oleoresin in other plant extract categories based on production synergy and raw material control. At 20x 2022E PE, we believe the stock looks attractive on a 29% 2020-25E earnings CAGR.