\u3000\u3 Shengda Resources Co.Ltd(000603) 363 Fujian Aonong Biological Technology Group Incorporation Limited(603363) )
Industry: Pig capacity reduction or acceleration is expected to usher in the bottom inflection point
By the end of 2021, there were 43.29 million fertile sows in China, slightly higher than the normal number. The supply of pigs will continue to maintain a loose situation. Combined with the traditional weak period of pork consumption after the Spring Festival and the repeated suppression of some demand by the epidemic, the downward pressure on pig prices is still large. Breeding profits may enter a deep loss range, and the deregulation of pig production capacity may accelerate, which is expected to usher in a bottom inflection point.
Enterprise: guided by corporate culture, build a leading agricultural and animal husbandry enterprise
Excellent enterprise core. Cultural guidance: aonong pays attention to cultural accumulation and precipitation, originates from practice, is upright and pragmatic, and leads the development of the company from top to bottom. Incentive mechanism: the company promotes the five-level incentive scheme, and the extensive and continuous equity incentive can effectively stimulate the enthusiasm and ownership of employees and promote the achievement of performance objectives. Team building: the senior management team has professional educational background and senior work experience. The “five modernizations” team promotes the talent team to be more efficient, professional, young and innovative in structure.
Aquaculture sector: the core breeding system supports the expansion of aquaculture. 1) Sufficient reserve of core production capacity: the company has built a perfect breeding system, focusing on breeding pigs, and has sufficient reserve of sow production capacity. In 2021, the number of sows on hand in H1 reached 387000, an increase of 29% over 2020. At the same time, the cumulative production capacity investment reached 6.155 billion yuan, and some production capacity expansion projects will be completed and put into operation successively, with great potential for commercial pig production. 2) Advantages of marketing area breeding layout: the company focuses on the southern marketing area of pig breeding, cooperates with feed and other businesses, continuously improves cost control and improves the profit space of breeding. In 2020, the gross profit of breeding will reach 47.74%, constantly catching up with and surpassing enterprises in the same industry. 3) Steady expansion of marketing scale: aonong has been marketing rapidly in recent years, with 3.25 million pigs in 2021, an increase of 141% year-on-year. In addition, the company’s cash flow remained relatively stable while breeding expansion. 4) Strategic extension of food business: the company accelerates the extension of industrial chain, actively arranges the field of slaughtering and food processing, relies on the advantages of information technology to carry out standardized and large-scale production and whole process quality control, create a green, healthy and traceable brand, and realize vertical integrated development.
Feed sector: feed as the core, providing comprehensive professional services. The company’s feed and animal protection business has grown steadily, and its market share has been continuously improved. At the same time, the company has intensively cultivated product categories and improved product lines to provide efficient comprehensive services for downstream aquaculture, and the customer stickiness is expected to continue to deepen.
Valuation: the breeding industry is expanding rapidly, and the average market value is high in cost performance
Fujian Aonong Biological Technology Group Incorporation Limited(603363) head average market value is cost-effective. As of the closing on February 24, according to the estimation of the 22-year marketing target, the average market value of Fujian Aonong Biological Technology Group Incorporation Limited(603363) pigs was about 1047 yuan, which was lower than that of muyuan, Wenshi, New Hope Liuhe Co.Ltd(000876) and other pig enterprises, which was relatively cost-effective. With the implementation of equity incentive and the promotion of business expansion, the subsequent listing may exceed expectations, and the performance flexibility can be expected.
Investment advice
Fujian Aonong Biological Technology Group Incorporation Limited(603363) is a leading agricultural and animal husbandry enterprise integrating feed, breeding, food, biopharmaceutical and other businesses. The company adheres to the brand positioning of “feed centered service enterprise and food oriented pig raising enterprise”, and actively promotes the industrial extension. The company has a prominent reserve base and advantages of core breeding capacity, has the potential of breeding expansion, and is expected to seize the opportunity of cycle reversal.
We estimate that the net profit attributable to the parent company from 2021 to 2023 will be -1.209 billion yuan, – 115 million yuan and 1.833 billion yuan respectively, and EPS will be -1.77 yuan, – 0.17 yuan and 2.68 yuan respectively, corresponding to 5 times of PE in 23 years, giving a “hold” rating.
Risk tips
\u3000\u30001. The fluctuation of pig cycle is affected by many factors such as supply and demand, epidemic diseases and government intervention. There is a possibility that the change of industry capacity in the future is less than expected and the market may fluctuate.
\u3000\u30002. The company’s performance fulfillment is sensitive to the achievement of internal listing objectives and cost objectives. Although the company has taken many measures to increase investment and incentives, the listing and cost target achievement still need to be tracked and observed.
\u3000\u30003. Shenzhen Agricultural Products Group Co.Ltd(000061) large price fluctuations have a direct impact on the company’s feed raw materials and breeding costs. The global epidemic is rampant, pushing up the cost of supply chain and raw materials. The Shenzhen Agricultural Products Group Co.Ltd(000061) bulk market may remain high, which may put pressure on the comprehensive cost of the company’s business.
