\u3000\u3000 Wens Foodstuff Group Co.Ltd(300498) (300498)
Matters:
The company released its 2021 annual performance express. In 2021, the company is expected to realize a net profit attributable to shareholders of listed companies of -13.337 billion yuan, a year-on-year decrease of 279.61%; The net profit after deducting non recurring profit and loss was -14.636 billion yuan, a year-on-year decrease of 329.35%. The performance was greatly affected by the sharp fluctuation of pig price in 2021. At the end of the reporting period, the company was in good financial condition, with total assets of 96.904 billion yuan, an increase of 12.57% over the beginning of the period; The owner’s equity attributable to shareholders of listed companies was 32.805 billion yuan, down 28.35% from the beginning of the period. In addition, the company amortized equity incentive expenses of about 500 million yuan, and preliminarily accrued impairment reserves of about 2.1 billion yuan for the current inventory of consumptive biological assets and productive biological assets.
Guoxin agricultural point of view: 1) Wens Foodstuff Group Co.Ltd(300498) pig and yellow feather chicken breeding business is in a leading position in the industry. From the perspective of marginal cost improvement, the company has continued to polish the breeding mode and achieved good results after experiencing the training of African swine fever. The complete cost of pig breeding has improved significantly in 2021, and it is expected to continue to steadily reduce costs and increase efficiency through fine management in 2022. In terms of the speed of capacity expansion, the company has better control over the production rhythm at the bottom of the cycle, and the capacity and capital reserves are relatively sufficient. It is expected to seize more shares against the trend through continuous capacity expansion, so as to further open the growth space of the company and enjoy the dividend of both volume and price brought by the cycle reversal. 2) Risk tip: uncontrollable pig epidemic deaths occurred in the industry, and the cost pressure caused by the uncontrollable rise in the price of feed raw materials such as grain. 3) Investment suggestion: Wens Foodstuff Group Co.Ltd(300498) livestock breeding scale and management level are in the leading position in the industry, and the foundation for capacity release is solid. The “company + modern breeding community” model continuously polished in African swine fever will further help the company reduce costs and increase efficiency. In 2022, the growth rate of pig slaughter and the space for cost reduction are more flexible, and yellow feather chicken breeding is expected to continue to benefit from the recovery of price market. It is estimated that the net profit attributable to the parent company in 21-23 years will be -133.4 / – 5.2/7.04 billion yuan, the corresponding EPS will be -2.09 / – 0.08/1.11 yuan, and the corresponding PE of the current stock price will be -9.5 / – 242.0/17.9x, giving a “buy” rating.
Comments:
The scale of pig breeding was gradually restored, and the yellow feather chicken business benefited from the recovery of the market
The company is the leading enterprise in pig and yellow feather chicken breeding in China. It has been deeply engaged in livestock and poultry breeding for nearly 30 years. Its main business includes the breeding and sales of Broilers and pigs, as well as the breeding of ducks, cows, layers and pigeons and the sales of products. With the dividend of increasing the concentration of pig breeding industry in recent ten years, the company focuses on the development of pig breeding business, and its operating revenue proportion has increased from 48% in 2013 to 62% in 2020, while the broiler breeding business has been reduced from 47% to 32%.
On February 23, the company released the performance forecast for 2021. In 2021, the net profit attributable to the shareholders of the listed company is expected to be -13.337 billion yuan, a year-on-year decrease of 279.61%. The sharp decline in profit is mainly due to the deep loss of pig business. The price of pigs fell sharply in 2021. The company sold 13217400 pigs (including hairy pigs and fresh products) in 2021, a year-on-year increase of 38.4%, The average selling price of hairy pigs was 17.39 yuan / kg, a year-on-year decrease of 48.18%. At the same time, due to the fattening of some purchased pig seedlings, the continuous promotion of pig breeding optimization, the continuous rise of feed raw material prices and other factors, the overall breeding cost increased in 2021. However, from the perspective of marginal change trend, the overall pig breeding cost of the company shows a downward trend. According to the company’s announcement, the full cost of comprehensive (including self breeding seedlings and purchased seedlings) breeding is about 11 yuan / kg in the third quarter of 2021. It is expected that the cost will continue to maintain a downward trend in 2022, and the full cost target will be reduced to less than 7.8 yuan / kg in 2022, so there is still much room for cost improvement. In addition, in terms of poultry business, in 2021, the company sold 1.101 billion broilers (including hairy chickens, fresh products and cooked foods), a year-on-year increase of 4.76%, and 57.9789 million ducks (including hairy ducks and fresh products), a year-on-year increase of 1.85%. In 2021, the overall situation of the poultry market has improved. The production performance of the company’s poultry industry has maintained a historically high level for many consecutive months. Although the breeding cost has been raised due to the continuous rise in the price of feed raw materials, the company’s poultry business is profitable as a whole.
Continue to polish the pig business model, and there is much room for improvement in the future
“Company + modern breeding community” may become a solution under non plague conditions. In the context of non plague normalization, whether the epidemic situation of farmers’ farms can be effectively controlled and the loss of farmers can be reduced is the key to the improvement of the company’s pig breeding business. On the one hand, the company improved the hardware supporting facilities required for biosafety prevention and control, built additional supporting facilities such as disease monitoring laboratory, secondary and tertiary decontamination center and material transfer station, extended the epidemic prevention line, blocked the risk of cross infection, promoted the application of new technologies such as infrared imager, throat swab and antibody detection, and established biosafety information management system, video monitoring system Epidemic surveillance data management system. On the other hand, the company actively develops the “company + breeding community” model, with the unified land acquisition and unified standard construction by the company, and completes the three supplies and one leveling, which is conducive to solving the problems of cooperative farmers’ land acquisition difficulties, lack of funds, environmental protection failure and so on. Through the unified admission of cooperative farmers, centralized management and complete prevention and control facilities have been realized, and the production efficiency has been greatly improved. According to the company’s announcement, the “company + modern breeding community” model has more advantages in complete cost control. The chicken business will save 0.5 yuan / pig, and the pig business will save about 75 yuan / head. At the same time, allowing cooperative farmers to be their own bosses can also greatly improve the enthusiasm of cooperative farmers and give full play to the spirit of ownership. Through the upgrading and transformation of existing farmers and family farms, we can maximize the trinity of professional, intensive and efficient modern breeding, reduce labor intensity, make breeding a decent and comfortable job, and attract rural youth to return home and start businesses, Becoming a professional farmer is expected to solve the problem of brain drain in pig breeding.
The capital reserve is relatively sufficient, and the bottom of the cycle expands orderly
Faced with the risk of tight cash flow caused by the bottom of the pig price cycle, the company has made sufficient capital preparation. On the one hand, the company issued 9.297 billion convertible bonds in April 2021, including 4.252 billion yuan to be invested in pig breeding projects, 1.136 billion yuan to be invested in chicken breeding projects, 1.13 billion yuan to be invested in waterfowl breeding projects, and 2.779 billion yuan to supplement working capital. On the other hand, the company has abundant cash on hand. By the end of September 2021, the company has more than 12 billion yuan in cash and cash equivalents, which can effectively control the normal pace of production and operation. In addition, the company has actively expanded financing channels, including bank loans, medium bills, short-term financing, and supply chain financial financing tools such as gold orders, chengtietong and bank acceptance bills. The company has applied for many types and amounts of various financing tools that have not been used.
We believe that at the bottom stage of the current downturn in pig prices, the capacity expansion of most breeding enterprises will be greatly limited or even shrink, while Wens Foodstuff Group Co.Ltd(300498) has better control over the production rhythm. The completed capacity of its existing pig farms is about 46 million, which can meet the needs of the target of about 18 million in 2022, and there is no need for large-scale capital expenditure for the time being. At the same time, after experiencing the tempering of African swine fever, the company continues to polish the breeding mode. With the support of technical and financial advantages, it is expected to seize more shares against the trend through continuous capacity expansion, so as to further open the growth space of the company and enjoy the dividend of both volume and price brought by cycle reversal.
Investment suggestion: be optimistic about the performance elasticity after the repair of pig price and give “buy”
Wens Foodstuff Group Co.Ltd(300498) ‘s pig and yellow feather chicken breeding business is in a leading position in the industry. From the perspective of marginal cost improvement, the company has continued to polish the breeding mode and achieved good results after experiencing the training of African swine fever. The complete cost of pig breeding has improved significantly in 2021, and it is expected to continue to steadily reduce costs and increase efficiency through fine management in 2022. In terms of the speed of capacity expansion, the company has better control over the production rhythm at the bottom of the cycle, and the capacity and capital reserves are relatively sufficient. It is expected to seize more shares against the trend through continuous capacity expansion, so as to further open the growth space of the company and enjoy the dividend of both volume and price brought by the cycle reversal. It is estimated that the net profit attributable to the parent company in 21-23 years will be -133.4 / – 5.2/7.04 billion yuan, the corresponding EPS will be -2.09 / – 0.08/1.11 yuan, and the corresponding PE of the current stock price will be -9.5 / – 242.0/17.9x, giving a “buy” rating.
