\u3000\u3000 Wens Foodstuff Group Co.Ltd(300498) (300498)
Core view
Wens Foodstuff Group Co.Ltd(300498) is a modern agricultural and animal husbandry enterprise group with livestock and poultry breeding as its main business and supporting related businesses. After the non plague, the company’s production system has been impacted, and the market doubts whether Wen’s model can maintain its advantages under the normalization of non plague. As a former industry leader, the company has regrouped and continuously improved its business in the past 21 years, with cost reduction, efficiency increase and impairment provision in place. In the future, the company has a clear trend of continuous repair of volume and profit, and is ready to take over the new cycle.
Highlight 1: the main business of breeding, multi-dimensional expansion. In terms of volume, the company is the largest broiler breeding enterprise and large pig breeding enterprise in China. According to 2020, the company’s yellow feather broiler market accounted for 23.8% and pig market accounted for 1.8%. At the same time, the company’s annual market volume of duck breeding is nearly 60 million and the annual sales volume of white feather broiler seedlings is nearly 180 million. The sale of livestock and poultry products is affected by the market price, which leads to the fluctuation of income and profit. Therefore, the company arranges trade, feed and animal protection in the upstream, slaughtering and fresh food in the downstream, and supporting agricultural and animal husbandry equipment and financial investment. While the company is gradually moving forward from a traditional production-oriented enterprise to a food enterprise, it also escorts the main business of pigs and chickens.
Highlight 2: cooperative breeding, original intention remains unchanged. The core of the company’s business model is the compact “company + farmers”. Through the outsourcing of fattening links, the farmers’ labor force and their own sites are fully utilized for fattening, so that the average investment in capacity construction of the company is about 300 yuan / head lower than that of the company’s self-supporting model. Since the plague, the company’s breeding has been impacted, but the company has eliminated the turnips and promoted the iterative renewal of the mode. With the upgrading of old pig farms and the promotion of high-standard “breeding community”, the company’s epidemic prevention ability has been significantly improved and its business scope has been significantly improved.
Highlight 3: regroup and reverse the boom. After more than one year of adjustment, the company’s cost and production capacity have been fully restored. In terms of production capacity, the company has 26 million fattening capacity and 1.1 million high-performance breeding sows, which is enough to support the target of more than 20 million slaughter in the future; In terms of cost, the company stopped purchasing pig seedlings in May, and the complete cost of breeding continued to decline. In November, the complete cost was about 17.6 yuan / kg, a decrease of 20% compared with Q3. In the future, with the elimination of the influence of purchased piglets and the recovery of breeding pig quality, the company’s cost still has great room for decline. The company’s target cost in 2022 is 15.6 yuan / kg; In terms of cycle, with the continuous decline of pig prices, the elimination of industrial production capacity has been started. The Ministry of agriculture’s ability to breed sows decreased by 1.2% month on month in November, which has decreased for five consecutive months, and the reversal of pig prices is gradually approaching.
It is estimated that the number of pigs sold by the company in 21-23 years will be 13.22/18/28 million respectively, and the net profit attributable to the parent will be -13.17/9.90/12.634 billion yuan, with a year-on-year increase of – 277.3% / 107.5% / 1175.8% respectively. Considering that the performance of some comparable companies in 22 years is consistent, the expectation is still in an abnormal state, and the performance returns to normal with the recovery of the cycle in 23 years, 11xpe will be given according to the 23-year level of comparable companies, and the target price is 21.88 yuan, “Buy” rating is given for the first time.
Risk tips: epidemic risk, pig price fluctuation risk, raw material price fluctuation risk, food safety risk, etc.
