This week's market
Shenwan agriculture, forestry, animal husbandry and fishery industry (- 3.27%), ranking of Shenwan industry (21 / 28); Shanghai Stock Index (- 1.13%), CSI 300 (- 1.67%), small and medium-sized 100 (0.25%);
Important information
In February 22nd, the No. 1 central document was issued in 2022, and the key work of Rural Revitalization was comprehensively promoted in 2022. Document requirements: vigorously implement the soybean and oil production capacity improvement project, vigorously promote the tackling of key agricultural core technologies such as seed sources, and fully complete the phased tasks of high-standard farmland construction.
On February 24, Russia decided to launch a special military operation in Donbas, and the situation in Ukraine escalated. We believe that the instability in Ukraine, a major food exporter, will greatly affect the global and China's food trade and regional supply and demand expectations, and have a greater impact on China. Changes in the situation may raise the mood and market of China's international grain bulk market in the short term.
On February 21, the Ministry of agriculture and rural areas announced that according to the regulations on the administration of veterinary drugs and the measures for the registration of veterinary drugs, four kinds of veterinary drugs such as Shuangge Zhixie granules declared by 16 units including Luoyang Huizhong veterinary drugs Co., Ltd. were approved as new veterinary drugs.
Core view
Breeding industry: in terms of pigs, the overall demand for pigs slowed down in January with the end of sausage enema. At the same time, the main pig enterprises had a strong willingness to sell before the festival, and the pig market and industry profits fell. In terms of quantity, boosted by the Spring Festival and strong willingness to sell before the festival, the industry sells in large quantities. In January, 4.1387 million pigs were sold by the main pig enterprises (except for muyuan), an increase of 19.2% month on month. The demand slows down after the festival, and the overall listing volume may gradually decline. From the quarterly slaughter of industrial pigs in the past five years, the average slaughter of 160 million pigs in the second quarter was 25.1% lower than that in the first quarter. In terms of price, the pig market in January slowed down as the demand for sausage sausage ended, and the pig market fell. The sales prices of pigs of major pig enterprises decreased significantly in January. Wen's, tianbang and Zhengbang were - 13.1%, - 13.2% and - 14.8% month on month respectively. In terms of profit, pig breeding returns to the loss range with the decline of the market. As of February 18, the profit of pig self breeding was -495.14 yuan / head, and the de production capacity of the industry will be accelerated.
We believe that the game of pig sector has entered the stage of 3.0. The classic cobweb model reflects the market logic of price reduction - production reduction - short supply - price increase - production increase - price reduction. From the historical and recent performance of the capital market, the game of the capital market against the pig sector has gradually evolved from the initial "price increase" (stage 1.0) to "production reduction" (stage 2.0) to "price reduction" (stage 3.0). The capital market has digested the expectation of price reduction at the beginning of the year, and formed a certain expectation of production reduction and upward expectation in the future cycle in advance. "The lower the price, the lower the production and the higher the share price". The logical chain of "cobweb model" of capital market game continues to move forward.
According to our calculation, in history, the average market value of the top pig enterprises listed in the 19-20 pig cycle reached the level of 1200018000 yuan, while the average market value of the top pig enterprises listed in the 15-16 pig cycle reached the level of 8 Tcl Technology Group Corporation(000100) 00 yuan (as shown in the figure below). We believe that the starting background of the 19-20 year pig cycle is relatively special, and the short-term impact of environmental protection and non plague factors on the industry's production capacity is very obvious. At present, if the pig cycle reverses, it is more driven by the profits of cyclical industries. Referring to the valuation, the pig cycle of 15-16 years (i.e. the average market value of about 8000 yuan) is more comparable. We believe that under the current valuation level, the market has reflected a certain expectation of cycle reversal in advance, but the production capacity and consumption level after the price reduction still need to be observed and verified, and the pig sector will enter a more intense game stage.
In terms of trading, considering that the capital market has reflected the expectation of a certain reversal of pig cycle, it is suggested to pay attention to the fluctuation caused by the short-term price reduction and production reduction. However, on the whole, the low pig price in the third quarter and the extreme value of the sector's breeding loss also mean that the most pessimistic expectation of the sector has been released, and there is a safety margin down the sector. From the recent breeding profits, the profits of self breeding, self breeding and outsourcing piglets have entered the deep loss range, the deregulation of production capacity will be accelerated, and bargain hunting intervention is a more appropriate strategy. However, this round of pig cycle will return to the Epic Cycle of 19 years, which does not have the external environment of environmental protection and non plague impact on production capacity. It is suggested to maintain rational expectations.
In terms of broilers, we believe that the supply and demand fundamentals of yellow feather chicken will promote the market cycle upward. 1) On the supply side, the long-term breeding loss in the early stage makes the industry's production capacity obvious. According to the China Animal Husbandry Association, the stock of parents of yellow feather broilers has been in a low position for nearly four years. We believe that the overall production of yellow feather broilers in 22 years will be at a low level in recent years. 2) On the demand side, as the market of live pigs and other animal proteins bottoms out, the substitution squeeze of yellow feather broiler demand will gradually ease and the margin will be better. In addition, the consumption of live poultry suppressed by the epidemic has been fully digested in the past two years, with marginal improvement; In the short term, it is supported by consumption at the end of the year, boosted by long-term economic recovery, and the yellow feather broiler sector is expected to usher in a business cycle. Pay attention to the relevant targets of Jiangsu Lihua Animal Husbandry Co.Ltd(300761) , Hunan Xiangjia Animal Husbandry Company Limited(002982) , Wens Foodstuff Group Co.Ltd(300498) and other sectors.
In terms of industrial chain integration, we believe that head breeding enterprises extend to downstream slaughtering and processing, food manufacturing and even terminal sales by virtue of their advantages of upstream integration and large-scale, with continuous enrichment of business and continuous improvement of value. Head breeding enterprises are expected to rely on their core advantages to continuously improve their competitiveness and open the performance growth curve.
Key recommendations: China's large-scale aquaculture leader with obvious cost advantages [ Muyuan Foods Co.Ltd(002714) ], and [ New Hope Liuhe Co.Ltd(000876) ] and [ Fujian Sunner Development Co.Ltd(002299) ] with rapid progress in industrial chain integration.
Planting industry: the seed industry has ushered in a historic opportunity of "three-phase superposition". During the policy period, on February 11, the State Council issued the "14th five year plan" to promote agricultural and rural modernization. In the chapter "promoting innovation driven development", it once again emphasized the revitalization of the seed industry - strengthening the protection of germplasm resources, carrying out breeding innovation, strengthening the construction of seed industry base and strengthening the supervision of seed industry market. During the industrial period, bulk grain prices remained high, farmers' willingness to grow grain increased, and corn and rice seed stocks, supply and demand were optimized, promoting the prosperity of the seed industry. The commercialization of transgenic technology is approaching. On January 21, four regulations related to agricultural genetically modified organisms, including the measures for the administration of safety evaluation of agricultural genetically modified organisms, the measures for the examination and approval of major crop varieties, the measures for the administration of crop seed production and operation licenses, and the provisions on the naming of agricultural plant varieties, were officially implemented.
In the medium and long term, we are firmly optimistic about the prospects of the national seed industry and the improvement of the fundamentals of relevant seed enterprises. Under the banner of seed industry revitalization, the iteration and reconstruction of the industry are constantly implemented from top to bottom, which is highly deterministic. "Iteration" refers to the iteration of biological breeding technology. In January, relevant policies on transgene and gene editing were implemented to support the efficient approval of relevant varieties and show the determination and strength of the policy. "Reshaping" is the reshaping of the industry pattern. On November 24, the National Conference on promoting the work of supporting excellence of seed enterprises once again stressed that "we should improve and strengthen a number of seed industry leading enterprises with integrated innovation ability and adapt to market demand, and build the backbone force for the revitalization of seed industry". Dragon seed enterprises with scientific research advantages will become more and more prominent. "Top down" refers to the implementation of policies, systems, supervision and law enforcement under the banner of seed industry revitalization. The overall industry fundamentals will be better and better.
In terms of trading, we believe that although there is a time cycle for the achievement of the industry performance, the revitalization of the seed industry is sustained and certain. The cashing cycle will inevitably lead to the settlement of "impetuous" funds and fluctuations, but it also brings opportunities for bargain hunting allocation to "long-term" funds. Retreat from the "floating foam" with high short-term expectations, and with the style suppression coming to an end, there will be better trading opportunities.
Key recommendation: seed industry leader [ Yuan Longping High-Tech Agriculture Co.Ltd(000998) ] with genetically modified trait reserve, and [ Beijing Dabeinong Technology Group Co.Ltd(002385) ] with leading genetically modified technology and multiple businesses.
Pet industry: pet industry is a high-quality track catering to social development and consumption trend. According to the white paper on China's pet industry, China's pet industry has a market scale of 100 billion, with a compound annual growth rate of nearly 20%. At present, overseas giants occupy a high share of China's pet food and medical market segments. We believe that the branding of domestic OEM enterprises will continue to accelerate, and have comparative advantages in understanding and deepening Chinese traditional and modern channels. The pet industry will usher in opportunities for domestic substitution, and we will continue to follow up and pay attention.
Key recommendation: China's pet food industry leader [ Yantai China Pet Foods Co.Ltd(002891) ].
Grain and oil industry: affected by the Shenzhen Agricultural Products Group Co.Ltd(000061) cycle, the disturbance of global supply chain under the epidemic and other factors, the prices of soybean and other oilseeds have risen, the cost side pressure of grain and oil enterprises has become prominent, and the squeezed profits have declined significantly. We believe that the performance of grain and oil enterprises is expected to boost with the marginal improvement of the pressure on the cost side - the future Shenzhen Agricultural Products Group Co.Ltd(000061) cycle and the recovery of consumption after the easing of the epidemic on the demand side. Focus on integrated supply chain management and operation of leading enterprises. Key recommendation: grain and oil leader [ Yihai Kerry Arawana Holdings Co.Ltd(300999) ], which is expected to develop in the overall kitchen business.
Risk tip: the economic recovery is less than expected, the epidemic situation, etc
