\u3000\u3 China Vanke Co.Ltd(000002) 714 Muyuan Foods Co.Ltd(002714) )
A leading pig enterprise integrating self breeding and self raising Muyuan Foods Co.Ltd(002714) is the absolute leading enterprise of pig breeding in China. The company adopts the large-scale integrated self breeding mode and continues to expand its breeding capacity. In 21 years, the company has sold 40.263 million pigs, yoy + 122.28%, accounting for 6% of the pigs sold in China. Affected by the sharp decline in pig prices, the company expects to realize a net profit of 6.5-8 billion yuan to its parent in 21 years, a year-on-year decrease of 70.86% – 76.32%.
The process of industry scale continues to advance, and cost advantage is an important basis for the sustainable development of enterprises. China’s pig breeding industry has a low degree of scale and industry concentration, and there are a large number of free range farmers and small and medium-sized farms.
In recent years, under the influence of policy support, environmental protection, leading expansion and other factors, the large-scale process of the industry has been continuously promoted. At the same time, the pig industry has obvious volatility and periodicity. This cycle has been going down rapidly since 21 years. At present, it has started the second round of bottoming in the next year. The industry has entered the loss stage again, and the cash flow is facing great pressure. We believe that cost advantage is an important basis to help enterprises safely get through the bottom of the cycle, or even cross the cycle against the market and achieve listing growth. Under the background of uncertainty of pig price, it is most critical to grasp the certainty of cost. Enterprises with cost advantage have higher performance growth elasticity and investment value.
Continue to build the company’s breeding cost advantage. We believe that the cost advantage of muyuan is reflected in the following aspects: the feed side adheres to self-produced feed, and the advantages of formula and raw material procurement are obvious; A complete breeding system has been established at the breeding end, the sow population and production expansion system have not been damaged by non plague, the sow production performance is excellent, and the cost of piglets remains low; The breeding end adopts the whole process autotrophic mode, and the advantages of epidemic prevention and control have been fully tested under non plague conditions. With the addition of the company’s daily operation and fine management, the cost advantage is significant, and the breeding cost of the company has only increased slightly after the non plague. At present, the total cost of the company has reached 15 yuan / kg, and the goal will be to reach 13 yuan / kg in 22 years, so as to continue to build a strong cost advantage of the company.
The company has sufficient existing capacity reserves and continues to improve its market share for a long time. We believe that the current second round of pig production capacity removal is highly deterministic, and it is expected to start a new round of cycle starting point in 22 years. By the end of the 21st century, the company could breed 2.831 million sows, support more than 55 million to be sold, and have sufficient capacity reserves. The company has industry-leading cost advantages, superimposed with the company’s sufficient capacity reserves, and will enjoy high performance growth in the next round of rise. The company’s outstanding operating and cost advantages will also greatly help the company further expand its production capacity and continuously improve its market share under the background of large-scale pig breeding.
Profit forecast and investment rating of the company: we expect the net profit of the company from 2021 to 2023 to be 7.265 billion yuan, 6.770 billion yuan and 36.802 billion yuan respectively, corresponding to EPS of 1.38, 1.25 and 6.80 yuan respectively. The current share price corresponds to the PE value from 2021 to 2023, which is 38.43, 42.41 and 7.80 times respectively. The market value of the company in 22-23 years is 445 billion yuan, and the target price is 84.56 yuan / share. “Strongly recommended” rating for the first coverage.
Risk tip: animal disease risk, pig price fluctuation risk, pig production capacity removal is less than expected, and the company’s production capacity expansion is less than expected
