\u3000\u3000 Wellhope Foods Co.Ltd(603609) (603609)
Event overview
The company issued the announcement of pre reduction of performance in 2021. During the reporting period, it is expected to realize the net profit attributable to listed shareholders of 111 million yuan, a year-on-year decrease of 91%.
Analysis and judgment:
Pig breeding sector dragged down performance, while white feather broiler business performance declined
In 2021, the company expects to realize a net profit attributable to listed shareholders of RMB 111 million, a year-on-year decrease of 91%, which is mainly due to the performance dragged down by pig breeding and white feather broiler business, while the operation of feed sector is still stable. Specifically: 1) in terms of pig breeding, during the reporting period, pig prices continued to decline significantly, resulting in losses in this sector. 2) In terms of white feather broilers, the cost of chicks rose & Poor consumption in the terminal market made the comprehensive price of chicken all the way down, resulting in a significant decline in the performance of the sector. 3) Benefiting from the demand growth of downstream feed business driven by the recovery of pig production capacity, the feed sales volume of the company increased steadily.
Multi line parallel, stable operation of the company’s feed business segment
In 2021, the production capacity of pigs in the South will be accelerated, the breeding efficiency of cattle, sheep and other ruminants will be good, and the market demand for pig feed and ruminant feed will be good; The breeding cost of laying hens has been rising, and the consumption of poultry has decreased significantly. The feed industry experienced a year-on-year increase of 12.6%, and the feed price of the company increased year-on-year. As a result, the feed industry continued to grow at a high level, the average sales price of feed enterprises increased year-on-year, and the feed industry maintained a stable growth. The company plans to achieve a minimum annual growth of more than 20% in feed sales in the next three years, which will impact the goal of doubling in three years. The feed business is multi-line and parallel, flexible to deal with complex breeding market, and superimposed sales growth, which is expected to thicken the company’s profits.
Layout “industrial chain integration”, and the development of deep processing business group can be expected
In 2018, the company identified the food business as a strategic business and is now fully promoting it. At present, the company has 17 holding and joint-stock slaughtering enterprises, with an annual slaughtering capacity of 800 million feathers. The company gives full play to the layout advantage of “industrial chain integration”, deeply processes the high-quality chicken of slaughtering enterprises in the industrial chain, and finally forms cooked food and conditioning products. Offline, mainly sold to catering chain central kitchens, enterprise and school canteens, supermarket convenience stores, etc; Online, one after another landed on Taobao Jingdong and other e-commerce platforms. In addition, the company actively expanded the export business of cooked food, and cooked food products have entered the markets of Japan and South Korea, with a good response. By extending the industrial chain to meet the escalating consumer demand, the company is expected to further explore the market and increase its market share.
Investment advice
Considering the expansion of the company’s pig breeding scale and the growth of subsequent pig slaughter, as well as the increase in feed demand driven by the recovery of pig production capacity, we raised the company’s revenue forecast for 21-22 years to 28.974/33.533 billion yuan (the previous values were 26.319/28.715 billion yuan respectively), lowered the net profit attributable to the parent to 111 / 507 million yuan (the previous values were 1.253/1.327 billion yuan respectively), and added a new forecast for 2023, The company’s revenue was 38.881 billion yuan and the net profit attributable to the parent company was 1.080 billion yuan. To sum up, we expect that from 2021 to 2023, the company’s EPS will be 0.12/0.55/1.17 yuan respectively, corresponding to the closing price of 11.31 yuan / share on February 9, 2022, and PE will be 93.59/20.56/9.66 times respectively, maintaining the company’s “buy” rating.
Risk tips
The recovery of pig prices was less than expected, the sales volume of feed was less than expected, and the slaughter volume of pigs was less than expected.
