\u3000\u3000 Muyuan Foods Co.Ltd(002714) (002714)
China’s pig industry has a broad space, and the short-term production capacity shows a trend of de industrialization
China’s pig breeding industry has more than trillion market space. At present, there is a large gap in the scale of the industry compared with foreign countries. The improvement of breeding concentration in the future will bring growth opportunities for large-scale enterprises. In the short term, in the first half of 2022, the supply pressure of live pigs will not decrease, adding to the decline of meat consumption after the Spring Festival and the repeated impact of covid-19 epidemic, the decline of pig prices may accelerate after the Spring Festival, the capacity is expected to accelerate the de industrialization, and the expectation of cycle reversal is expected to continue to strengthen.
The company has focused on raising pigs for 30 years and has become the leader of China’s pig industry chain
The company was founded in 1992. After 30 years of development and accumulation, it has formed a pig breeding mode characterized by “large-scale integration of self breeding and self breeding”, and established a complete closed pig industry chain integrating feed processing, pig breeding, breeding pig expansion, commercial pig breeding and pig slaughter. At present, the company is one of the largest large-scale integrated pig breeding enterprises in China, and it is also one of the largest pig breeding enterprises in China.
The company insists on expanding against the trend to highlight the leading style
The company has achieved rapid expansion of production capacity by virtue of efficient reincarnation binary breeding system, perfect biosafety prevention and control system, abundant funds and land reserves. At present, the number of pigs has exceeded 40 million, ranking first in the country. At present, the company has reserved more than 100 million land resources with breeding capacity, and built a pig breeding capacity of more than 70 million. By the end of 2021, the company had 2.831 million efficient breeding sows and 1.1-1.3 million reserve sows. At present, the company has abundant cash flow and is expected to continue to maintain the rapid growth of pig slaughter in the next two years.
The company has significant cost advantages and is expected to help cross the cycle
The company has significant cost advantages and its profitability is at the leading level in the industry. Through the split of the company’s breeding cost, it is found that its cost advantage is mainly reflected in two aspects: raw materials and labor costs. Tracing the root causes mainly benefits from: ① self breeding without entrusted breeding costs; ② The advantages of breeding pigs reduce the cost of piglets; ③ The advantages of feed procurement and formula are obvious, which can effectively reduce the feed cost; ④ Application of modern intelligent pig house and equipment to improve production efficiency; ⑤ Pay attention to talent construction and motivate employees. The company’s cost advantage comes from 30 years of technology and experience accumulation, which has created the company’s core moat and competitive barriers, which is expected to help the company through the cycle.
The company responded to the policy and accelerated the layout of slaughtering business, which is expected to become a new growth point
The company started its slaughtering business around 2019. By the end of 2021, the slaughtering sector of the company had deployed 23 slaughtering subsidiaries in Henan, Shandong, Anhui, Inner Mongolia and northeast provinces. At present, the company has two slaughterhouses in Neixiang and Zhengyang officially put into operation. The four slaughterhouses in Yingshang, Caoxian, Shangshui and Tieling have entered the trial operation stage, with a total slaughtering capacity of 16 million. It is expected that the slaughtering capacity will reach 37 million by the end of 2022. In the future, it is expected to take various measures such as improving capacity utilization, broadening sales channels, optimizing sales structure and reducing production costs, Support the slaughtering business to achieve profitability.
Profit forecast and valuation
We believe that Muyuan Foods Co.Ltd(002714) as the leader of China’s pig breeding industry, the number of pigs sold ranks first in China. At present, the company has rich sow reserves and abundant cash flow. Adhering to the counter trend expansion, it is expected to further improve the market share. The cost control industry is leading or helping to cross the cycle. The slaughtering business is expected to contribute to a new profit growth point. Based on the marketing planning and cost improvement of the company in the next two years, as well as the fluctuation of the pig market, the company is expected to realize the net profit attributable to the parent in 2021, 2022 and 2023 respectively of 7.763 billion yuan, 6.487 billion yuan and 29.149 billion yuan, with a year-on-year change of – 71.72%, – 16.44% and 349.36%, and EPS of 2.07, 1.73 and 7.75 yuan / share respectively, corresponding to PE of 26.44, 31.64 and 7.04 yuan respectively; The net assets per share are 16.14, 17.87 and 25.62 yuan / share respectively, and the corresponding Pb is 3.38, 3.06 and 2.13 respectively. Considering the company’s historical valuation, head average market value and its long-term growth, it is given a “buy” rating of 5 times Pb in 2022, corresponding to the target price of 89.35 yuan.
Risk tips
(1) animal disease risk.
(2) risk of large fluctuation of pig price.
(3) price fluctuation risk of feed raw materials.
(4) food safety risks.
