Since the outbreak of covid-19 epidemic, epidemic prevention policies, travel restrictions and repeated epidemics have had a serious impact on the consumption scenes of tourism, catering, hotels, food, drinks and other industries. At present, the epidemic situation is expected to continue to improve. The 14th five year development plan of tourism and other industries also looks forward to the liberalization of entry and exit when the epidemic situation allows. We believe that with the support of policy support + better prevention and control situation, the inflection point of consumption recovery is coming and the prosperity is expected to continue to rise. Looking forward to the future, how to layout the investment after the epidemic and how to interpret the recovery market, the large consumption team of East Asia Qianhai Securities Research Institute launched a series of in-depth reports on “predicting the recovery and layout after the epidemic”, which is series 5: agriculture.
Core view
This report aims to sort out the current investment logic of the agriculture, forestry, animal husbandry and fishery industry, and focuses on answering: 1) how to view the investment opportunities in the agricultural sector in the “post epidemic” era; 2) How to grasp the periodicity and growth of subdivided sectors; 3) How to select the time point of configuration and investment target. In view of the above problems, we believe that:
The core of investment in the agricultural sector lies in the contradiction between supply and demand. The epidemic has hit both ends of supply and demand in the agricultural sector: (1) on the demand side, the epidemic has impacted consumer demand. Some Shenzhen Agricultural Products Group Co.Ltd(000061) dominated by outbound consumption or relying on transportation and circulation in the main producing areas have been impacted due to the panic of the epidemic, increased difficulty in circulation, reduced demand for catering consumption and epidemic control policies. (2) Supply side: impact on production capacity and trade, insufficient operating rate, cold chain transportation risk and limited international circulation. In recent years, black swan events such as African swine fever, La Nina and drought have an impact on the supply side.
For the subsequent market deduction, we think we can focus on three main lines. (1) Pig breeding industry affected by “covid-19 epidemic” and “non plague”. (2) The epidemic hit the Shenzhen Agricultural Products Group Co.Ltd(000061) supply chain, and the rising grain prices drove the booming seed industry. (3) The epidemic situation on the supply side leads to the rise of labor and transportation costs. The salmon industry on the demand side is affected by the increased difficulty of epidemic circulation and the reduced demand on the catering B side. At present, the trend of agricultural upgrading is obvious, and each subdivided field is expected to usher in a configuration period in which “cycle” and “growth” resonate in the recovery stage. Pig breeding: the cycle is expected to reverse in the middle of the year. The head pig enterprises enjoy the periodic dividend of rising pig prices, plus the growth dividend of scale expansion and market share increase in the “cold winter”. Seed industry: under the contradiction between supply and demand, the increase of high grain prices and planting area is expected to bring the volume and price of seed industry to rise simultaneously, and gene commercialization is expected to land and open the growth space of the industry. Salmon: with the recovery of demand, the fish price is strong, the b-end business of Salmon Company is expected to recover, and China’s high gross margin products bring the second growth curve.
We recommend pig breeding, salmon and seed industry from the perspective of short, medium and long term. At present, fertile sows have been removed to the normal stock. After the festival in the first quarter, the supply and demand are tight, the pig price continues to bottom, and the removal of production capacity is expected to accelerate. It is expected to usher in a cycle reversal in the middle of 2022. At present, the market value of all pig enterprises is at the bottom of the allocation opportunity. In the post epidemic era, the demand for salmon recovers, the supply side is in tight balance in the long run, and the price rises. The supply side is under pressure due to the impact of last year’s red tide. The price of salmon is expected to remain high in 2022. It is suggested to seize the medium-term investment opportunity. Affected by the supply and demand cycle, the prosperity of traditional seed business is expected to continue to 2023, the landing of genetically modified seeds is expected to accelerate, the sales of genetically modified seeds is expected to be achieved within one year at the fastest, and high-quality leading seed enterprises are expected to benefit in the long term.
Investment advice
Seed industry: Policy dividends are continuously released to ensure China’s food security. The pattern of grain supply and demand has changed, the commercialization of GM has entered the fast lane, and the high prosperity of the seed industry continues. It is suggested to pay attention to the leading enterprises with strong R & D strength and rich GM reserves.
Pig breeding: there is still a mismatch between supply and demand in the current market, and the inflection point of the pig cycle has not yet arrived. It is suggested to pay attention to pig enterprises with cost advantages and high slaughter volume.
Salmon: in the post epidemic era, the demand for salmon recovers, the supply side is in tight balance in the long run, and the price rises. In the short term, affected by the red tide, the price of salmon is expected to remain high. It is suggested to pay attention to China’s leading salmon Joyvio Food Co.Ltd(300268) .
Risk tips
Macroeconomic fluctuations; Repeated non plague conditions; Extreme weather effects.
