The investment safety margin of pig breeding industry is high and the downside risk is controllable. We set the starting point of a new round of pig cycle at the time of bottom exploration, that is, October 2021 (the lowest weekly price at that time was 10.78 yuan / kg). The price is basically close to the bottom price in 14 and 18 years, which are 10.45 yuan / kg and 10.01 yuan / kg respectively. However, it should be noted that the breeding costs faced by breeding enterprises in this round of pig cycle have increased significantly, which means that such a bottom price brings an absolute deep loss (greater than the previous two losses) and a great consumption of cash flow. From another perspective, the deep loss mode of pig breeding also means that the upward trend of the pig cycle in the future is more certain. The cycle goes back and forth. We believe that the loss period of the pig cycle is a risk release period, which brings a higher safety margin to the investment.
From the perspective of production capacity, the stock of fertile sows reached a high of 45.64 million in June of 21. Since then, the production capacity has been continuously reduced and gradually accelerated, and the cumulative production capacity has been reduced by 5.9% in November. The rebound in pig prices in November restrained the speed of capacity removal to a certain extent, resulting in the stock of fertile sows rising to 43.29 million in December (mom + 0.77%). However, this is only a small episode in the process of capacity reduction. We think the pace of capacity reduction will continue in January. According to the data of China animal husbandry information network, the price of pigs fell to 13.97 yuan / kg at the end of January, significantly lower than the average breeding cost of the industry, and the industry is still at a loss. After a lapse of two months, the profit of self breeding and self breeding entered a deep loss state again in January 22 (- 249.28 yuan / head). The aggravation of the loss will further drive the industry to reduce production capacity, and the cumulative decline of fertile sows will gradually increase. In the process of continuous capacity reduction, people's expectations for the pig breeding sector will gradually increase. Although there will be a double dip in pig prices, the market's positive expectations for the sector have risen, which means that the optimal time point for sector allocation is now. On the whole, the current sector investment risk is low and the safety margin is high, which deserves active and key attention.
The perspective of data backtracking points to the allocation of breeding sector again. When it is right to look at the allocation time point from the perspective of data backtracking, we have highlighted it in the in-depth report in November 21. Based on the stock price and quarterly net profit of Muyuan Foods Co.Ltd(002714) since 14 years ago, muyuan has made seven quarterly losses during this period. Intervening in individual stocks in the loss quarter of Muyuan Foods Co.Ltd(002714) is the best buying point in each cycle, which can maximize the return on investment. We calculate and assume that the positions will be built successively in the first quarter of 2014 and held to the high point in the cycle, with an increase of 207%; Assuming that positions are built successively in the second quarter of 18 years, the increase during this period can reach 446%. Generally speaking, it is the best layout point for long-term funds to intervene in breeding stocks in the loss season. Of course, there must be fluctuations during the period. The suboptimal time point is that before the second bottom of the pig price, it will be a better time point for configuration, that is, what we call the present. Both the logical level and the data backtracking level point to grasp the current configuration opportunity of the pig cycle.
Investment suggestions: we emphasize once again that the allocation of pig breeding sector is the moment, and the cycle will not be absent. The market value of listed breeding enterprises is at a historical low, and the potential space is huge. From the perspective of individual stocks, leading enterprises are suggested to pay attention to Muyuan Foods Co.Ltd(002714) (002714), Wens Foodstuff Group Co.Ltd(300498) (300498), flexible targets are suggested to pay attention to Fujian Aonong Biological Technology Group Incorporation Limited(603363) (603363), Tecon Biology Co.Ltd(002100) (002100), Tangrenshen Group Co.Ltd(002567) (002567), etc
