Key investment points
Market review this week
This week (2022 / 3 / 7-2022 / 3 / 13), the CSI 300 index fell by 4.22%, and the Shenwan agriculture, forestry, animal husbandry and fishery index fell by 3.95% in the same period, outperforming the market by 0.27 percentage points, ranking ninth among the 28 Shenwan level industries. From the sub sectors of agriculture, forestry, animal husbandry and fishery, the growth and decline of planting industry / livestock and poultry breeding / feed / animal health care / fishery / Shenzhen Agricultural Products Group Co.Ltd(000061) processing sector this week were - 4.25%, - 3.46%, - 5.35%, - 8.25%, 1.84% and - 2.86% respectively.
Core ideas of this week
[pig] in February, the production capacity decreased or slowed down. It is suggested to grasp the cyclical trend change direction.
Recently, we have learned through research that the withdrawal rate of large-scale enterprises and retail investors from the industry in February is relatively slow. We estimate that the capacity removal of the industry in February is relatively mild. If the removal is still poor in March, it is expected that the possibility of prolonging the whole cycle will increase. At present, the far month contract prices are maintained at about 18000 yuan / ton, and the market is generally optimistic about the market in the second half of the year. However, we believe that the capacity removal data in February is less than expected, which is expected to impact the forward contract price, so as to correct the consensus expectation that the market is too optimistic about the pig price in the second half of the year.
What do you think of the later capacity deregulation? We believe that under the background that the market is generally optimistic about the market in the second half of the year, the stock of fertile sows of medium-sized farms and retail investors will remain stable, some farmers with sufficient funds are still willing to continue to supplement fertile sows, and only a few large breeding enterprises with tight funds will consider eliminating some sows to alleviate the pressure. Under the guidance of consistent expectations, the supply of pigs in the second half of this year may still be sufficient, making the price reversal in the second half of this year less than expected or the inflection point of the cycle delayed. However, if there is still no improvement in pig prices from April to may, it will have an impact on the enthusiasm of farmers who supplemented the fence from November to December last year, so as to accelerate the speed of farmers' elimination of sows.
The impact of import and slaughter weight on pig price still needs to be paid attention to, but the impact will be weaker and weaker. Import and market weight were important factors affecting the unexpected decline in pig prices last year. At present, the slaughter weight has decreased significantly, but it is still 4% higher than the normal weight level, which also has a great impact on the pork supply. The recent continuous price increase of feed will weaken the enthusiasm of farmers to press the slaughter, and the slaughter weight is expected to continue to decline. The current monthly import volume is about 200000 tons. Coupled with the release of imported frozen meat, it will affect about 10% of the pork supply in the market, but the depressed price will also lead to a further reduction in import volume.
Continue to recommend investment opportunities in the pig sector. At present, the pig price continues to be depressed, the market boosted by pork collection and storage is limited, the price of feed raw materials has been raised continuously for more than a week, the profit of pig breeding has been squeezed in both directions, and the breeding loss has continued to increase. We believe that although the speed of capacity removal slowed down in February, the overall trend of capacity removal has not changed, and the attention to the speed and range of capacity removal should be weakened in the short term, Focus on grasping the trend change direction of pig cycle.
[white feather broilers] the supply of broilers decreased next week, but chicken jelly sales were not smooth. The slaughter companies' enthusiasm for purchasing chicken was weakened. The price of meat chicken is expected to increase after next week, and there will be pressure above 8 yuan / kg. In the future, the slaughter cost of broilers will increase and the risk of loss will increase. Farmers will make up the slaughter carefully. It is expected that the price of chicken seedlings will be adjusted in a narrow range next week, and the increase will slow down. [animal protection] the research and development process of African classical swine fever vaccine has accelerated, and the investment opportunities in the sector have been highlighted. Recently, the Ministry of agriculture and rural areas has issued documents to relevant research institutions and units, requiring the study protection rate of non plague vaccine to reach 80%, the mortality rate of the control group to be no less than 80%, and providing sufficient protection for the intellectual property rights of the vaccine. We believe that subunit vaccine has absolute advantages in safety, Generally, there is no problem similar to the strengthening of the virus strain of gene deletion vaccine. When the protection rate reaches the standard, it is likely to pass the emergency evaluation and enter the application stage of veterinary drug products. At present, African classical swine fever is still the biggest threat to the pig industry. Large pig farms have a high acceptance of non classical swine fever vaccine. We expect that 600 million pigs will be sold every year, and each pig will be immunized twice, with a penetration rate of 25 yuan per injection and 80%, which will give birth to 24 billion market space, add more than 10 billion profits, and be divided up by several enterprises involved in R & D, The competition pattern of the industry may usher in major adjustments.
Investment advice
[pig breeding] cost reduction and efficiency increase in 2022 is still the main theme of the industry. It is recommended to pay attention to enterprises with "abundant reserves of sows, continuous realization of cost improvement and abundant cash flow".
[white feather broiler] the industrial chain has experienced a loss for one year. The deep loss in the downstream inhibits the enthusiasm of making up the fence. The decline in the price of chicken seedlings affects the profits of the incubator, or forces the chicken breeding farm to take the initiative to reduce the production capacity. We may see the month on month contraction of the supply of chicken seedlings in the third quarter of 2022, and pay attention to the changes in the stock of grandparents' generation chickens and parents' generation chickens in production. Recommend enterprises that focus on the layout of the whole industrial chain business and the target of the upstream main chicken seedling sales business.
[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. It is recommended to pay attention to the leading leaders in continuous capacity expansion and cost control, as well as enterprises that comply with the development trend of frozen fresh sales.
[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 focus on Pulike Biological Engineering Inc(603566) , which has obvious advantages in subunit vaccine research and development, and industry leaders with rich product reserves.
[seed industry] with the intensive introduction of favorable policies and the improvement of supply and demand fundamentals, the industry has ushered in an upward cycle. 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 be opened, the corn seed industry will usher in strong capacity expansion expectations, and the leading seed enterprises may usher in a high-speed growth stage. It is recommended to pay attention to seed enterprises with rich reserves of transgenic technology and varieties.
Risk tips
Covid-19 epidemic spread risk, international situation change risk, policy implementation less than expected risk, etc.
