\u3000\u3 Shengda Resources Co.Ltd(000603) 477 Leshan Giantstar Farming&Husbandry Corporation Limited(603477) )
Event:
Leshan Giantstar Farming&Husbandry Corporation Limited(603477) announcement: on March 22, the company’s public offering of convertible corporate bonds was approved by the CSRC.
Key investment points:
Fund raising helped to expand production capacity, and the scale advantage was further highlighted. From 2020 to the end of 2021, the company plans to build new breeding pig farm projects such as Yibin and Gulin, and breeding integration projects such as Pingtang and Dechang. Among them, the Dechang giant pig breeding integration project is expected to increase the production capacity of 36000 sows and 972000 pigs. As of August 31, 2021, the Dechang giant pig breeding integration project has invested 1.998 billion yuan, The issuance of convertible bonds will further help the company’s “Dechang integration project” to be successfully delivered and put into operation within the year. At present, the company has low cash pressure and high capital security, and is expected to safely survive the downturn of pig price. The company expects to sell 1.5 million pigs in 2022 to realize the counter trend expansion in the downward cycle.
The pig integrated industrial chain is arranged, and the provenance advantage is obvious. The company has a relatively complete integrated industrial chain of feed processing and livestock and poultry breeding, integrating feed production and sales, livestock and poultry breeding, propagation and breeding, and the business synergy has been effectively brought into play. The company introduces breeding pigs from pic, selects paternal breeding pigs with fast production speed, high feed conversion rate, good meat quality traits and strong adaptability and maternal breeding pigs with good reproductive performance, and makes full use of the principle of hybrid advantage and character complementarity to make their offspring comprehensively show excellent traits (high carcass lean meat rate, thin back fat, fresh and tender meat quality and uniform intermuscular fat). Through in-depth cooperation with Pipestone, the company introduced a full set of breeding concept and production technology system from the aspects of pig farm site selection, design, construction, facility and equipment configuration, pig farm production and operation process, followed the breeding concept of modernization, large-scale and industrialization, and greatly improved the company’s production performance, production efficiency and biological safety.
The profit forecast and investment rating are covered for the first time, the inflection point of the pig industry is approaching, the industry capacity will be cleared faster, the pig price will hit the bottom and rise, and the sector valuation is in the bottom range. The layout of the company’s integrated industrial chain is conducive to cost reduction and efficiency increase. The marketing of live pigs is expected to be greatly improved, and the performance flexibility is obvious. It is estimated that the net profit attributable to the parent company from 2022 to 2024 will be RMB 212 / 22.58/2.01 billion respectively, and the corresponding PE will be 60.19/5.64/6.33 times respectively, giving a “buy” rating.
Risk warning: the company’s performance is lower than the expected risk; Feed raw materials rose sharply and remained high; Non plague risk; Risk of long-term downturn in pig prices; Risks of less than expected sales, etc
