Report guide
The production capacity in February may be less than expected; Pay attention to the research and development progress of African classical swine fever subunit vaccine.
Key investment points
Market review this week
Last week (2022 / 3 / 142022 / 3 / 18), the CSI 300 index fell 0.94%, and the agriculture, forestry, animal husbandry and fishery index fell 2.12% in the same period, underperforming the CSI 300 index by 1.18 percentage points, ranking 17th among 28 Shenwan industries. In terms of sub sectors, the fishery / livestock and poultry breeding / Shenzhen Agricultural Products Group Co.Ltd(000061) processing / animal health care / feed / planting sector rose or fell by 1.25%, – 1.16%, – 2.65%, – 2.72%, – 3.29%, – 4.14% respectively last week.
Core ideas of this week
[live pig] the production capacity of the pig decreased or slowed down in February. It is suggested to grasp the cyclical trend change direction
Pig prices continued to fall and breeding losses continued to intensify. According to the monitoring of Boya Hexun, the average price of pigs nationwide this week was 11.89 yuan / kg, down 1.65% month on month and 57.27% year-on-year. The average price of compound feed for fattening pigs this week was 3.75 yuan / kg, up 0.81% month on month. This week’s self breeding loss was 547.16 yuan / head, a month on month decrease of 5.66% and a year-on-year decrease of 142.04%; The loss of purchased breeding was 258.05 yuan / head, a month on month decrease of 33.36% and a year-on-year decrease of 160.16%.
The production capacity in February may be less than expected. According to the research of Yongyi consulting, the number of fertile sows in 419 farms in February increased slightly by 0.32% month on month. We believe that retail investors have been the main body of capacity elimination in the past six months, but the speed of elimination of sows in large-scale farms is relatively slow. At present, the long-term contract prices are maintained at 1 Rizhao Port Co.Ltd(600017) 000 yuan / ton, reflecting that some farmers are optimistic about the market in the second half of this year, so they slow down the pace of elimination of sows. It is expected that the decline of fertile sows in China will be narrowed month on month in February. If the elimination is still poor in March, It is expected that the possibility of the whole cycle being elongated will increase. However, we believe that the capacity removal data in February is less than expected, which is expected to continue to impact the forward contract price. In the near future, the far month contract price has gradually declined, reflecting that the market’s expectation of pig price in the second half of the year has changed from optimism to pessimism.
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 pace of eliminating sows by retail investors and large-scale farms is still slow, some farmers with sufficient funds are still willing to continue to supplement sows, and only a few large breeding enterprises with tight funds will consider eliminating some sows to alleviate the pressure. However, the elimination of sows in the first half of this year is not ideal, which may cause that the supply of pigs in the second half of this year is still 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 to continue to fill the hurdles from November to December last year, so as to accelerate the speed of farmers’ elimination of sows. In the future, the main body of capacity removal will be local moderate scale enterprises with an annual output of 10005000 commercial pigs. Compared with large-scale breeding groups, moderate scale enterprises have no obvious advantages in cost control and capacity utilization, and there are few overlapping financing channels, Capital pressure is great. If the loss continues to increase, it will be forced to eliminate production capacity.
Continue to recommend investment opportunities in the pig sector. At present, the pig price continues to be depressed, the pork purchase and storage market is limited, and the price of feed raw materials has been raised for more than two weeks. 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. We should weaken our attention to the speed and range of capacity removal in the short term, and focus on the direction of the trend change of pig cycle.
[white feather broiler] there is not much meat and wool chicken in the market recently, but covid-19 epidemic affects the marketing rhythm and chicken demand. Slaughtering enterprises cut down the price and slaughtered wool chicken. It is expected that the price of meat and wool chicken will still fall next week. At present, the amount of chicken seedlings to make up the fence is reduced, and the low price may stimulate the mood of making up the fence. However, the covid-19 epidemic is uncertain, and there is still the possibility of egg reseller. The price of chicken seedlings may run low, and the rebound is limited.
[animal protection] the research and development process of CSFV vaccine in Africa is accelerated, and the investment opportunities in the sector are highlighted
Recently, the Ministry of agriculture and rural areas has issued documents to relevant research institutions and units, requiring the 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, and generally there will be no problems similar to the strengthening of gene deletion vaccine strains, When the protection rate reaches the standard, the probability can 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, all of them will be immunized twice, 25 yuan per injection, and 80% penetration rate, 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, and the competition pattern of the industry may usher in a major adjustment.
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 the leader Yuan Longping High-Tech Agriculture Co.Ltd(000998) , as well as other seed enterprises with rich reserves of transgenic technologies and varieties.
Risk tips
Covid-19 epidemic spread risk, international situation change risk, policy implementation less than expected risk, etc.
