[key investment points]
The breeding cycle is down, and the valuation is close to a historical low. From the beginning of 2021 to the beginning of December, the A-share agriculture, forestry, animal husbandry and fishery industry has decreased by 13.4%, with the largest decline in feed, animal protection and aquaculture. In both horizontal and vertical comparison, the A-share agriculture, forestry, animal husbandry and fishery industry is at a low historical valuation and the allocation value is prominent. According to the closing data on December 3, 2021, The price earnings ratio (TTM) of agriculture, forestry, animal husbandry and fishery industry is 45.39, which is located at the 91.41% quantile of the price earnings ratio in recent five years. The agriculture, forestry, animal husbandry and fishery industry continues to expand, and the net profit is under pressure due to the downward impact of the breeding cycle. In the first three quarters of 2021, the total operating revenue of A-share agriculture, forestry, animal husbandry and fishery industry companies (93 in total) is 765.8 billion, an increase of 22.9% year-on-year. The total net profit is -3.18 billion, a decrease of 104.9% year-on-.
The production capacity has not been cleared, and it is expected to gradually improve in the second half of 2022. Low pig food ratio is a necessary condition for cycle start, and exogenous factors have a greater impact. In May 2021, the downward cycle of pig price reached the bottom for the first time, and the expected loss of a single pig reached 700 yuan / head, which lasted for nearly five months. With the arrival of the peak season, the pork price rebounded and returned to profitability. At present, the stock of fertile sows is still at a high level, and the pressure on short-term pig prices is still large. It is expected that there will be a high probability of a double bottom after the Spring Festival, the pressure on cash flow will increase, or the clearing of production capacity will be accelerated. The concentration of leading pig enterprises in China and the United States still has 2-3 times room to improve, and the pig cycle has not been "ironed" due to the large-scale improvement.
The commercialization of GM is imminent, and the industry ushers in capacity expansion and concentration improvement. According to the experience of the United States, the total income brought by genetically modified crops accounts for about 10.1% of the total output value of the crops adopted, and the seed supply chain is expected to obtain a net income growth of 27.9%. Taking China's corn market as an example, GM is expected to expand the size of the seed industry market by 60%. Compared with traditional seeds, transgenic R & D investment is larger, the R & D cycle is longer, and the moat is deeper. Transgenic is expected to improve the concentration of seed industry. "Safety certificate" and "variety approval" are gradually implemented, and the commercialization of GM is expected to accelerate.
[configuration recommendations]
We believe that investment opportunities in the agriculture, forestry, animal husbandry and fishery industry in 2022 will focus on two main lines: first, the pig cycle and the pig food ratio have reached the lowest point in history, and will continue to bottom in the second quarter of 2022. Two years have passed since the high point of the 2019 cycle, and the pig cycle is expected to start in the next year. Suggestions: Wens Foodstuff Group Co.Ltd(300498) , New Hope Liuhe Co.Ltd(000876) . Second, genetically modified seeds, "safety certificate" and "variety approval" are gradually implemented, the commercialization of genetically modified seeds is accelerated, and genetically modified seeds are expected to bring about the expansion and concentration of the seed industry. It is suggested to pay attention to: Yuan Longping High-Tech Agriculture Co.Ltd(000998) , Beijing Dabeinong Technology Group Co.Ltd(002385) , Shandong Denghai Seeds Co.Ltd(002041) .
[risk tips]
Macroeconomic downside risk
Capacity clearing was less than expected
The commercialization of GM was less than expected
