Wens Foodstuff Group Co.Ltd(300498) (300498)
Investment logic: 1) since October, the pig price has rebounded slightly due to demand, reaching 17.9 yuan / kg in early December. It is expected that the price will be adjusted at the bottom after falling down in the future, and there will be a price inflection point at the end of 22 or the first half of 23 years; 2) The profitability of the company’s pig breeding was restored. The full cost reached a peak of 30 yuan / kg in the first quarter of 21, and then gradually adjusted. It is expected to reach 17.5 yuan / kg by the end of 21, with great performance flexibility; 3) At present, the stock of yellow feather chicken’s parents in production is about 13.4 million sets, which is at a low level. The price of hairy chicken has increased since August 21, and it is expected to improve in the future.
The pig breeding industry is gradually recovering, and the inflection point of the cycle may appear at the end of 22 years or the first half of 23 years. The outbreak of African swine fever in 2018 had a great impact on Chinese pig breeding. 544.19 million pigs were sold in 2019, a year-on-year decrease of 21.6%. The pig price reached 41 yuan / kg around November 2019, a record high. Since then, the price has been falling continuously since 2021, reaching 11 yuan / kg around October. Recently, the pig price has rebounded slightly, rising to about 17.9 yuan / kg in early December. The main reason is the demand pull. Winter is the traditional peak season for pork demand, and the demand for pickles in the South plays a supporting role in the price; In the medium and long term, the supply of pork is guaranteed. Since March, the number of newborn piglets in national pig farms has been more than 30 million per month, and has continued to grow. It is expected that from the fourth quarter of this year to the first quarter of next year, the number of fat pigs on the market will increase significantly year-on-year, and the price will fall back. From the perspective of fertile sows, the trend of capacity reduction is beginning to appear, and it still takes time to clear. As of October 2021, the number of fertile sows is 43.48 million, which is still in the Yellow range, and the backward capacity will be eliminated first in the elimination process, resulting in structural adjustment. Taking into account the development of Psy and other production efficiency indicators of fertile sows, which have been improved compared with the past, Although there is a trend of de production capacity for fertile sows, it is still necessary for pig prices to remain at a low level for a period of time in the future.
The company’s profitability is rapidly repaired and its performance is expected to usher in growth. The impact of non classical swine fever on the company’s pig breeding business is mainly reflected in three aspects: structure, slaughter volume and breeding cost: affected by African classical swine fever virus, the company eliminated some sows threatened by the virus and responded by outsourcing piglets for fattening sales. In 2020, the productive biological assets of the balance sheet showed that the outsourcing amount reached 5.19 billion yuan, a year-on-year increase of 117 times, Outsourcing accounted for about 36% of the new increase, while in 19, it accounted for 0.9%. Although the epidemic prevention ability of the company has been improved, the proportion of high-efficiency breeding sows has increased, and the structure has been optimized, the outsourcing of piglets has been stopped in May 2021. The number of pigs sold by the company rose steadily. In 2019 and 2020, the number of pigs sold was 18.52 million and 9.55 million respectively. As of November 21, a total of 11.99 million pigs were sold, which has exceeded the annual level in 2020. The company’s marketing has gradually recovered from the impact of non plague. On the breeding cost side, due to the outsourcing of piglets, epidemic prevention expenses and other reasons, the company’s complete cost increased, reaching 30 yuan / kg in the first quarter of 21. After efforts to control it, it gradually decreased. The company’s goal is to control the cost at 17.5 yuan / kg by the end of 2021, superimposed with the increase of slaughter volume, and the elasticity of profit level is large.
The production capacity of yellow feather chicken will be further reduced, or the prosperity will be improved. As of November 2021, the production capacity of yellow feather chickens of the parents in production was about 13.4 million sets, a year-on-year decrease of 8.1%. Since August 21, the price of wool chicken has increased. In November, the market price of wool chicken was about 16 yuan / kg, a year-on-year increase of 15.3%. On the other hand, the state said that it would severely crack down on the illegal trade of wild animals, prohibit the consumption of wild animals, restrict the trading and slaughter of live birds, encourage places with conditions to promote the centralized slaughter of live birds, and gradually cancel the live bird trading market. Nearly 80% of the sales of yellow feather chickens would go through the live bird market channel, which affected the sentiment of retail investors and withdrew from the market, Large scale breeding enterprises divide up this. The company promoted the transformation and upgrading of the poultry industry. In the first half of 2021, the listing rate of wool chicken reached 94.5%, and the feed meat ratio of broilers was lower than 2.9. Based on the general principle of “balance of volume and price”, the company adopted contract sales and wool fresh linkage according to market changes to maintain and stabilize the sales price of Broilers and maximize business benefits.
Profit forecast and investment suggestions. It is estimated that the EPS from 2021 to 2023 will be -1.63 yuan, 0.10 yuan and 1.75 yuan respectively, the corresponding dynamic PE will be – 11 / 173 / 10 times respectively, and the PE of comparable companies in the same industry will be 11 times in 2023. Considering that the company is a leading enterprise in pig and yellow feather chicken breeding, the profit level will gradually rise, the appropriate premium will be given to the company’s PE of 15 times in 2023, the first coverage will be given a “buy” rating, and the target price will be given 26.25 yuan.
Risk tips: sudden epidemic at the pig breeding end, lower than expected downstream demand, rising feed costs, etc.
