\u3000\u3 China Vanke Co.Ltd(000002) 311 Guangdong Haid Group Co.Limited(002311) )
Event: the company issued an announcement on the 2021 annual performance express.
Key investment points:
The overall profitability of the company is slightly lower than expected. According to the preliminary accounting results, the company can achieve a total operating revenue of 86.740 billion yuan in 2021, an increase of 43.79% over the same period of last year; The operating profit was 2.456 billion yuan, a decrease of 26.63% over the same period last year; The total profit was 2.453 billion yuan, a decrease of 25.31% over the same period last year; The net profit attributable to shareholders of listed companies was 1.601 billion yuan, a decrease of 36.54% over the same period of last year; The net profit attributable to the parent company after deduction was 1.523 billion yuan, a year-on-year decrease of 38.09%. It is estimated that the basic earnings per share in 2021 will be 0.97 yuan and the weighted average return on net assets will be 11.49%. Affected by many factors such as the pig cycle and the rise of raw material prices, although the company’s sales volume maintained a steady growth in 2021, the decline of profit margin led to the impairment of profitability.
Rising costs and expanding demand have ushered in a simultaneous rise in volume and price in the industry. Affected by the rapid recovery of pig production capacity and the rise of raw material prices, China’s feed prices have continued to rise since 2021. According to the data of feed industry association, from January to February 2022, the total output of industrial feed in China was 43.84 million tons, a year-on-year increase of 3.5%; The average price of compound feed for fattening pigs was 3.54 yuan / kg, an increase of 1.2% month on month and 3% year-on-year; The average price of broiler formula feed was 3.63 yuan / kg, an increase of 1.1% month on month and 5.2% year-on-year. While livestock and poultry feed prices are rising in volume and price, the prices of raw materials such as corn and soybean meal are also advancing by leaps and bounds. As of March 21, 2022, the average spot price of corn was 283098 yuan / ton, an increase of 96.27 yuan / ton in 2022. Recently, the spot prices of soybean meal and wheat in China have risen sharply, reaching a new high since 2008. Feed adopts the mode of cost plus. With the rise of raw material prices, the possibility of further price rise of products within the year cannot be ruled out. At the same time, small feed enterprises will accelerate their withdrawal from the market and the industry concentration will continue to increase in the future due to the impact of multiple factors such as rising raw material prices, increasing capital pressure and insufficient technical reserves.
The company’s performance fell due to the fluctuation of pig cycle and cost growth. In Q3 of 2021, the decline of pig price exceeded the market expectation, and the pig price once fell to about 10 yuan / kg, causing serious losses in the whole industry. In 2021, the company sold about 2 million pigs, including about 1.3 million purchased piglets, accounting for more than 60%. Due to the high price of purchased piglets at the beginning of 2021 and the low price and large loss of fat pigs in the second half of 2021, the net profit attributable to the parent of the company’s pig breeding business in the whole year was between 900 million and 1 billion, which had a great impact on the overall operating performance. With the deregulation of pig production capacity, it is expected that pig prices are expected to gradually stop falling and stabilize in the second half of 2022. After the start of a new cycle, the pig business is expected to benefit from the scissors gap of falling costs and rising prices. Secondly, in order to meet the company’s growing talent and capital needs, the company further expanded talent recruitment and increased borrowing in 2021, resulting in a year-on-year increase in the company’s administrative expenses and financial expenses of about 40% and 70% respectively.
The company’s main business grew steadily and its market share is expected to further increase. In 2021, the company’s feed external sales volume was about 18.77 million tons (excluding 860000 tons of internal breeding consumption), with a year-on-year increase of 28%; The company achieved an operating revenue of 86.740 billion yuan, with a year-on-year increase of 44%. The company’s feed sales scale and comprehensive competitiveness of products increased steadily. In 2021, the total output of industrial feed in China was 293443 million tons, with a year-on-year increase of 16.1%; Among them, the output of pig feed was 130765 million tons, a year-on-year increase of 46.6%; The output of meat and poultry feed was 89.096 million tons, a year-on-year decrease of 2.9%. In 2021, the growth rate of the company’s feed sales was not only higher than the overall growth rate of the industry, but also achieved contrarian growth when the growth rate of the poultry feed industry declined. According to the 2021 semi annual report, the company’s poultry feed sales volume was 4.55 million tons, a year-on-year increase of 12%. The company plans to achieve the sales target of 40 million tons of feed in 2025. With the steady growth of product sales, the market share of the company is expected to further improve.
Maintain the company’s “overweight” rating. The company ranks the second in China’s feed industry and the top 10 in the production and marketing scale of global feed enterprises. Its products are highly competitive. Taking into account the drag of pig business and the impact of expense provision, the company’s EPS from 2021 to 2023 was reduced to 0.97/1.64/2.51 yuan / share (originally predicted that the company’s EPS from 2021 to 2023 was 1.88/2.60/2.96 yuan / share). According to the situation of comparable listed companies in the feed industry, the company is given a valuation of 35x P / E ratio in 2022. Considering the leading advantages of the company, the improvement of industry concentration in the future and the fluctuation of pig cycle, the company is given a certain valuation premium to maintain the “overweight” rating of the company.
Risk warning: the risk of sharp fluctuations in the price of raw materials; The risk that the promotion of pig breeding business and seedling research and development are not as expected.
