\u3000\u30 Beijing Telesound Electronics Co.Ltd(003004) 98 Wens Foodstuff Group Co.Ltd(300498) )
The company is the double leader of pig and chicken breeding in China, and its business covers the whole industry chain of breeding Wens Foodstuff Group Co.Ltd(300498) established in 1983, it is a cross regional modern agricultural and animal husbandry enterprise group with livestock and poultry breeding as its main business and supporting related businesses. The company is the leading breeding enterprise with the third slaughter volume of pigs (13.217 million) and the first slaughter volume of broilers (1.101 billion) in China in 2021. According to the company’s performance express, fy2021 achieved a revenue of 64.963 billion yuan, a year-on-year decrease of 13.31%, and a net loss attributable to the parent company of 13.337 billion yuan, including about 500 million yuan of amortized equity incentive expenses and about 2.1 billion yuan of initial impairment provision for the current inventory of consumable biological assets and productive biological assets.
Pig breeding industry: the general trend of large-scale breeding may usher in a cycle reversal within the year. In 2021, China’s pork consumption recovered to 53.15 million tons and the output was 48.85 million tons, making it the world’s largest producer and consumer of live pigs. Environmental protection, biological prevention and control and other factors have promoted the raising of breeding threshold, showing a large-scale and intensive development trend. In 2018, the production capacity of the non plague outbreak industry decreased sharply, which promoted the surge of pig prices from 2019 to 2020. High profits promoted the industry to make up the market quickly. The stock of fertile sows increased to the peak in June 2021. Overcapacity led to the decline of pig prices. Fertile sows began to decline month on month since July 2021. It is expected that the 2022h1 industry will still face the peak of marketing. The range of deep losses and cycle length of this round are greater than those in previous years, At present, it has entered the stage of secondary deep loss, with high feed cost and low pig price. The capacity removal is expected to accelerate, and the 2022h2 pig price is expected to reverse.
The company has significant advantages in R & D + breeding, rapid recovery of production capacity and leading the industry. The company’s R & D involves many fields upstream and downstream of aquaculture, and has rich research results in breeding, new veterinary drugs and other aquaculture related research. With the steady progress of breeding and propagation after non plague, the productive biological assets of the company began to recover rapidly in Q2 of 2020. In December 2021, the company has about 1 ~ 1.1 million high-performance fertile sows, which is in the leading position in the industry, of which the proportion of highly fertile sows exceeds 90%, and the proportion of self-cultivation in the new productive biological assets rebounds to 75% +.
The “Wen’s model” is gradually upgraded, and the breeding efficiency is expected to continue to improve. The company took the lead in implementing the close industrial division and cooperation mode of “company + farmer (or family farm)” in the industry, and gradually iterated to “company + modern breeding community + farmer” and “company + modern industrial park + professional farmer”, driving the rapid expansion of the company’s breeding scale for more than 30 years. Under the light and light combination mode, the breeding efficiency is expected to continue to improve and the cost is relatively controllable. Under the upgrading mode, cooperative farmers have shown a downward trend in recent years, with 46700 cooperative farmers (yoy-8.6%) in 2021h1, and the average breeding scale of each household has increased. In March 2021, the company issued 9.297 billion yuan of convertible bonds and invested in 3 integrated pig breeding projects, 3 integrated broiler breeding projects, 1 waterfowl project and 13 self built pig fattening and breeding community projects to vigorously promote the transformation and upgrading of the model.
The industrial chain is actively extended, the consumption attribute is expected to be highlighted, the yellow chicken business is expected to contribute positive cash flow, and the capital advantage is significant. In addition to the early layout of upstream feed and veterinary medicine, the company accelerated the integration of “breeding slaughtering cold chain transportation fresh marketing”. In 2020 / 2021h1, the company sold about 132 / 69 million fresh poultry products, yoy + 37.7% / 33.5%. In 2021h1, the proportion of fresh chicken sales in the total sales increased to 13.5%. The convertible bond project also vigorously developed the slaughtering project. In 2021q4, the stock of parents’ generation of yellow chicken in production has dropped to a relatively reasonable level, and the chicken price has also been boosted. It is expected that with the support of the supply side, the yellow chicken business can achieve reasonable profits in 2022, contribute positive cash flow and have significant capital advantages.
Profit forecast: as the double leader of pig and broiler breeding in China, the company has significant advantages in breeding scale, cost control and operation management efficiency. The upstream and downstream layout of the industrial chain is comprehensive, and the downstream actively cuts into the field of fresh food. We are optimistic about the recovery of the company’s pig breeding capacity and the recovery of yellow chicken prices. The growth of chicken and pig double drive is expected in the future. It is estimated that the net profit attributable to the mother of the company from fy20212023 is -13.3/16.1/11.5 billion yuan, The year-on-year changes are profit to loss / loss to profit / 616.2% respectively. Based on the Pb valuation method, we believe that the company’s reasonable share price is 25.05 yuan, corresponding to fy2022pb 3 x, which is rated as “buy” for the first time.
Risk tips: sudden epidemics or natural disasters, repeated covid-19 epidemics, lower than expected reversal of pig prices, etc
