Muyuan Foods Co.Ltd(002714) (002714)
Key investment points:
At this stage, pig prices hit the bottom and rebounded, which is expected to decline in the future, forming a second bottom.
Pig prices fell to a low point in October this year and have rebounded slightly at this stage. By the end of October, the number of fertile sows was 43.48 million, the production capacity had not been completely eliminated, and the pig stock was still at a high point. The recent rebound in piglet prices and the rising price of pig fattening feed indicate that the centralized marketing of pigs in the future will lead to the second bottom of pig prices. After the second bottom, pig prices are expected to hit the bottom and rebound.
The company has prominent cost advantages and obvious industry leadership.
The company’s breeding cost has been the lowest of large-scale breeding plants, which is now 14.7 yuan / kg. The company built its own feed factory and adopted low protein feed formula to reduce feed cost; Self built pig houses, strictly control the water source, air and feed, avoid the source of infection, and reduce the cost of drugs and vaccines; The sales volume increased rapidly, so as to dilute the depreciation cost of fixed assets per kilogram.
The company implements integrated industrial chain development, and the sales volume is expected to reach a new high.
The company adopts the business model of “full autotrophy, full chain and intelligence”. It is a whole industry chain company integrating feed processing, breeding pigs, fattening pigs and slaughtering. The company relies on its integration advantages to reduce costs, improve management efficiency and maintain the company’s long-term high-speed growth. From 2013 to 2020, the number of pigs sold by the company increased from 1306800 to 18115000, and the CAGR reached 45.59% in seven years. The number of pigs sold increased rapidly. It is estimated that the company can sell 40 million pigs in 2021.
The unique recurrent binary breeding system ensures the company’s future slaughter volume.
The company has established a recurrent binary breeding system with both breeding and meat. Pseudo binary pigs can be directly retained for breeding without reducing reproductive efficiency. At the same time, they can also be converted into commercial pigs for fattening when there are enough breeding pigs. By the end of November, the number of reserve sows of the company was about 1 million, which can be converted into fertile sows for production.
Earnings forecast, valuation and rating
We expect the company’s EPS in 2021-23 to be 1.60/2.04/4.84 yuan / share, corresponding PE to 31x / 25X / 10x, net asset BPS per share to be 10.86/12.49/16.36 yuan / share and corresponding PB to be 4.6x/4.0x/3.1x. As pig breeding is a cyclical industry, muyuan adopts the model of self built pigsty with heavy assets, and we adopt the Pb valuation method. Referring to the average valuation of the company’s previous value center and comparable companies of China pig breeding company, the company is given 5xpb in 2022, with the corresponding target price of 62.45 yuan, and the “buy” rating is given for the first time.
Risk statement
Large scale spread of African classical swine fever; Pig prices have been low for a long time; The price of feed raw materials rose sharply.
