Key investment points
Market review this week
Last week (2021 / 12 / 27-2022 / 1 / 2), the CSI 300 index rose 0.39%, the agriculture, forestry, animal husbandry and fishery index rose 0.04% in the same period, underperforming the CSI 300 index by 0.35 percentage points, ranking 23rd among the 28 Shenwan industries.
From the perspective of agriculture, forestry, animal husbandry and fishery sub sector, the rise and fall of fishery / livestock and poultry breeding / Shenzhen Agricultural Products Group Co.Ltd(000061) processing / animal health care / feed / planting sector last week were 6.67%, 1.12%, 0.93%, 0.29%, – 1.71% and – 4.30% respectively.
Core ideas of this week
[pig breeding] we believe that pig prices will remain volatile and downward before the Spring Festival in the future. Recently, we have observed that the proportion of low body reborn pigs purchased by some slaughterhouses has increased significantly, and a large number of 80kg and 90kg pigs have been sent to slaughter. On the one hand, the loss of slaughter weight is mainly due to the low vaccine coverage of piglets at low prices in the third quarter and the increase of pig epidemics in winter. On the other hand, the scale farm accelerated the marketing progress at the end of the year, and the use of high daily weight gain feed showed its pessimistic expectation of future pig prices and the fact that cash flow was tight. We have seen a short-term weight loss, but the national average pig price is still maintained at about 16 yuan / kg, which indicates that the demand side provides strong support. We have observed that the sales and execution of Airport Flights have improved month on month recently, indicating that the impact of the covid-19 epidemic on consumption has been repaired, but the decline in demand after the Spring Festival is inevitable. We believe that the current large number of low-weight slaughter will overdraft the slaughter volume of standard pigs in the next 1-2 months, and the pig supply will decrease periodically or superimpose the seasonal decline of demand, In the next 1-2 months, the pig price will still maintain a volatile downward trend, and the downward speed and slope of the pig price are expected to accelerate. In the follow-up, we will continue to pay attention to the change of the slaughter weight. At the same time, we believe that the overdrawn slaughter volume may correct the pig price expectation in the second quarter, and the inflection point and low point of the pig cycle are expected to appear in advance.
[white feather broiler] after new year’s day, the slaughter volume of broilers may increase, while the inventory of frozen chicken products is high, and the stock intensity before the Spring Festival is not high. It is expected that the price of wool chicken will be adjusted weakly after new year’s day, and there is still a risk of loss. After the Spring Festival holiday, slaughtering enterprises started work, and the chicken seedling supplementary fence returned to normal, but the enthusiasm for supplementary fence is low. It is expected that the chicken seedling price may fluctuate at a low level next week.
[animal protection] new progress in research and development of non plague vaccine or heat of catalytic plate. At present, some enterprises have submitted the application for emergency evaluation of African classical swine fever genetic engineering subunit vaccine to the Ministry of agriculture and rural areas, and it is expected that the evaluation and approval method will be further modified. We believe that subunit vaccine has absolute advantages in safety, and generally there will be no problems similar to the strengthening of gene deleted vaccine strains. Veterinary drug evaluation includes general evaluation, priority evaluation, emergency evaluation There are four review methods for filing review. Emergency evaluation refers to the emergency evaluation initiated by the Ministry of agriculture and rural areas for veterinary drugs required for emergency disposal of major animal diseases. If it is suggested that it can be used for emergency, the animal husbandry and Veterinary Bureau of the Ministry of agriculture and rural areas may issue technical standard documents after fulfilling the approval procedures, and the relevant veterinary drug production enterprises shall apply for temporary veterinary drug product approval number in accordance with the measures for the administration of veterinary drug product approval number. Once it enters the clinic, it is expected to catalyze the upward heat of the whole animal protection plate. If the plague vaccine is not successfully commercialized, it will drive the capacity expansion of the whole vaccine plate. We expect that under the background that 650 million pigs are fully immunized with non plague vaccine, it will give birth to more than 10 billion market space, add more than 5 billion net profit, and be divided up by several major vaccine enterprises, and the industry competition pattern may usher in major adjustments.
[seed industry] the seed industry revitalization policy was issued intensively, focusing on the leader of high-quality seed industry. On December 24, 2021, the 32nd meeting of the Standing Committee of the 13th National People’s Congress adopted the decision of the Standing Committee of the National People’s Congress on Amending
<中华人民共和国种子法>
The decision shall enter into force as of March 1, 2022. The new seed law highlights the protection of original innovation, and the protection of intellectual property rights in the seed industry has moved to a new height. We believe that stricter regulatory policies for the seed industry are conducive to improving the industry concentration, optimizing the industry competition pattern, leading seed enterprises may benefit from the first mover advantages in transgenic technology and varieties, and grasp the strategic development opportunities of the industry.
Investment advice
[pig breeding] affected pig prices, the sector has been adjusted back to a reasonable range, and the market value of high-quality leaders is at the bottom of history. It is suggested to seize the investment opportunity on the left. We choose the target around two main lines: one is the enterprise that can continuously increase the number of sows in the next 1-2 quarters, and the other is the enterprise with the fastest cost improvement in the next 1-2 quarters.
Therefore, the first echelon is recommended: Wens Foodstuff Group Co.Ltd(300498) (the cost improvement continues to be realized, and the production capacity reserve of sows is rich to support the listing growth; the short-term stock price rises slightly, but there is still much room for growth) New Hope Liuhe Co.Ltd(000876) (the efficiency of breeding sows continues to improve, there is a large space for cost reduction, and sufficient capital reserves support the capacity expansion in cold winter; the current stock price is still at the bottom, which can provide a high margin of safety), Muyuan Foods Co.Ltd(002714) (self breeding has created the core cost advantage, and the capacity has been steadily expanded, firmly sitting in the leading position). Secondly, the second echelon is recommended: Tecon Biology Co.Ltd(002100) (the cost control industry is leading: Xinjiang and Gansu enjoy the advantages of natural non plague prevention and control, and Henan has a slightly higher cost but less impact on the whole; the marketing growth can be expected to achieve an annual marketing volume of 5 million by 2023; the animal protection and feed sector will develop steadily). Finally, it is suggested to pay attention to the cost improvement and breeding of fertile sows in Jiangxi Zhengbang Technology Co.Ltd(002157) , Tech-Bank Food Co.Ltd(002124) , Tangrenshen Group Co.Ltd(002567) , Fujian Aonong Biological Technology Group Incorporation Limited(603363) and other enterprises.
[white feather broiler] the industrial chain has experienced a loss for one year. The deep loss in the downstream inhibits the enthusiasm for column filling. The decline in the price of chicken seedlings affects the profits of the incubator, or forces the chicken farms to take the initiative to reduce production capacity. We may see the month on month contraction of the supply of chicken seedlings in the third quarter of 2022. It is recommended to pay attention to the industry leader Fujian Sunner Development Co.Ltd(002299) : layout the whole industrial chain of white feather chicken, rapid development of downstream meat products processing business and steady improvement of profitability. Secondly, the elastic targets Shandong Minhe Animal Husbandry Co.Ltd(002234) , Shandong Yisheng Livestock & Poultry Breeding Co.Ltd(002458) of the main chicken seedling sales business in the upstream of the industrial chain are recommended.
[yellow feather broiler] even if the industry accelerates the clearing of production capacity at the low point of the cycle, the head enterprises still expand against the trend. It is expected that the market share of the head enterprises will further increase after the gradual withdrawal of free range farmers in the future. Recommended concerns: Wens Foodstuff Group Co.Ltd(300498) (the absolute leader in China’s yellow feather chicken market), Jiangsu Lihua Animal Husbandry Co.Ltd(300761) (the rapid expansion of production capacity and the industry-leading cost control), Hunan Xiangjia Animal Husbandry Company Limited(002982) (the leader in yellow feather chicken ice fresh products. The increase of sales volume of ice fresh products drives the improvement of profitability).
[dynamic insurance] the sector has fallen to a reasonable range due to the drag of pig price. It is expected that the reversal of pig price in the second half of 2022 will lead to the upward prosperity of the industry, and the sector is expected to usher in valuation repair. It is suggested to lay out at a low level. It is recommended to pay attention to China Animal Husbandry Industry Co.Ltd(600195) (rapid growth of vaccine in foot-and-mouth disease market, benefit from prohibition of chemical drugs and outstanding performance in environmental protection), Pulike Biological Engineering Inc(603566) (obvious advantages in subunit vaccine research and development, gradually rich product pipelines), Jinyu Bio-Technology Co.Ltd(600201) (vaccine leader in foot-and-mouth disease market, and new products support long-term growth).
[seed industry] favorable policies have been issued intensively, and the new version of the seed law emphasizes the protection of original innovation. We believe that the continuous tightening of intellectual property protection in the seed industry will help the industry reshuffle, and the phenomenon of illegal licensing, piracy and infringement may be improved. The leading Seed Enterprises are expected to further increase their market share with high R & D technology and capital barriers. Basically, the prosperity of China’s grain prices will rise in 2022, supporting the rise of seed prices. It is expected that high-quality seed enterprises will usher in a performance release period in the next few years, the curtain of genetically modified organism breeding will open, the corn seed industry will usher in strong capacity expansion expectations, and the leading seed enterprises may usher in a high-speed growth stage. Recommended concern Beijing Dabeinong Technology Group Co.Ltd(002385) : transgenic traits have been approved more, with obvious first mover advantage. Yuan Longping High-Tech Agriculture Co.Ltd(000998) : rice and corn seeds are the leaders, with outstanding advantages of traditional varieties, and the participating companies have rich reserves of transgenic technology. Shandong Denghai Seeds Co.Ltd(002041) : corn seed is the leader, which is expected to benefit from the landing of transgenic corn.
Risk statement
Covid-19 epidemic spread risk, international situation change risk, policy implementation less than expected risk, etc.
