\u3000\u3 China Vanke Co.Ltd(000002) 299 Fujian Sunner Development Co.Ltd(002299) )
Matters:
Announcement of the company: Fujian Sunner Development Co.Ltd(002299) received the simplified equity change report issued by the shareholder RWC asset advisors (US) LLC (hereinafter referred to as "RWC") on March 18, 2022. On March 16, 2022, RWC increased its holdings of 1697100 shares of the company through centralized trading in Shenzhen Stock Exchange, accounting for 0.136% of the total share capital. After this equity change, RWC holds Fujian Sunner Development Co.Ltd(002299) 63848323 shares, with a shareholding ratio of 5.133%.
Guoxin agricultural viewpoint: 1) Fujian Sunner Development Co.Ltd(002299) is the high-quality target of the white feather broiler industry, which is mainly reflected in: first, as the industry leader, it has the advantages of industrial chain integration and scale, and the unit cost continues to decline; 2、 The white feather chicken breeding industry has entered a mature period. Under the background of the sinking of the industry profit center to the downstream, the company has arranged in advance and accelerated the extension to the downstream food deep processing sector, and the diversified growth of channels can be expected. The company's acquisition of foreign RWC holdings this time also shows its optimism for the company's long-term development in the future. 2) At present, the white feather broiler industry is at the bottom of the cycle. We believe that the time point of the reversal of the bottom of the white chicken market may be approaching, which is mainly due to the deep loss of chicken seedlings, commercial chickens and other breeding links under the double squeeze of the rising feed cost and the depressed price market. The cost of chicken seedlings is 2.5 yuan / piece, but the price of chicken seedlings is only about 1 yuan / piece. The delayed elimination of feather changing in the industry has been decreasing, and the trend of capacity elimination is expected to accelerate, At the same time, we expect that the pig cycle will probably reverse in 2023, which is expected to boost the demand for white feather broilers. In addition, from the perspective of investment, under the background of undervalued value, Fujian Sunner Development Co.Ltd(002299) has sufficient safety margin, so it is suggested to focus on the layout. 3) Risk warning: sudden large-scale uncontrollable epidemic disease; The scale expansion is less than the expected risk. 4) Investment suggestion: Fujian Sunner Development Co.Ltd(002299) as a leading enterprise in the whole industry chain of white feather chicken, in terms of breeding business, the competition barrier of the whole industry chain is deep, the cost advantage and bargaining advantage are gradually highlighted, and the profitability toughness can be maintained even at the bottom of the industry cycle; In terms of food business, the company's food business is growing rapidly, with rich product categories, strong R & D ability and multi-level coverage of channels. On the basis of maintaining the traditional advantages of b-end, the company's C-end channel will also focus on making efforts to usher in the outbreak period and open new growth for the company. To sum up, we believe that as the leader of white feather chicken industrial chain integration, the proportion of its food business continues to increase. On the one hand, it will significantly improve the company's anti cycle ability and steadily move up the profit center. On the other hand, it may lead the whole industry to sink into food deep processing and build a leading chicken consumer brand in China. It is estimated that the company's net profit attributable to the parent company in 21-23 years will be RMB 459 / 16.72 / 3.341 billion, the earnings per share will be RMB 0.37/1.34/2.68, and the profit growth rate will be - 77.5% / 264% / 100% respectively, maintaining the "buy" rating.
Comments:
It was increased by foreign RWC asset advisors (US) LLC, demonstrating its confidence in the long-term development of the company
According to the company's announcement, RWC asset advisors (US) LLC increased its holdings of 1697100 shares of the company on March 16, accounting for 0.136% of the total share capital. After this equity change, the shareholder RWC held Fujian Sunner Development Co.Ltd(002299) 63848323 shares, with a shareholding ratio of 5.133%, becoming the second largest shareholder of the company. In addition, RWC disclosed that it began to gradually increase its holdings of Fujian Sunner Development Co.Ltd(002299) , through centralized trading in the six months before March 16. From September 2021 to March 2022, the total net purchases each month accounted for 0.37%, 54.38%, 22.90%, 11.97%, 1.00%, 1.02% and 5.27% of the total current holdings respectively. The net growth value of the total holdings in the previous six months accounted for 97.7% of the total current holdings, RWC's steady shareholding layout of Fujian Sunner Development Co.Ltd(002299) shows its full confidence in the long-term development of the company.
Deep barriers to aquaculture business, food business development space
We believe that Fujian Sunner Development Co.Ltd(002299) is the most complete white feather broiler industry chain in the world and is expected to usher in a new era of transformation by accelerating its extension to the downstream food deep processing sector. On the one hand, the company has the advantages of industrial chain integration and scale, and the unit cost is declining. From 2009 to 2019, the company's annual production capacity of white feather broilers increased from 96 million to 500 million, an increase of 4.2 times. Thanks to the advantages of scale, the unit cost of the company has been declining. Since Q3 of 2021, enterprises in the industry have made frequent losses, and the breeding sector of the company has achieved bottom profit. In addition, by the end of 2019, the company has achieved self-sufficiency of all ancestral breeding chickens, got rid of the restriction of foreign seed supply, and further highlighted its leading advantages. At the same time, after ten years of breeding layout, the company has successfully forged the "Shengze 901" white feather broiler matching line, and officially obtained the certificate of new livestock and poultry varieties (matching lines) issued by the national livestock and Poultry Genetic Resources Committee in December 2021, providing a new profit growth point for the company in the future. On the other hand, the company's industrial chain has accelerated to extend to the downstream food deep processing sector, and the growth of multiple channels can be expected. The company has rich categories and differentiated positioning of various factories. Based on excellent product R & D ability, it can effectively meet the diversified needs of customers and is favored by high-quality large customers. In addition, the company is committed to building a central kitchen and family convenient food experts. Considering that the central kitchen and prefabricated dishes are in the stage of market outlet and the market space of 2B and 2C ends is broad, the business at both ends is expected to usher in high growth in the future.
The production capacity of white feather broiler may be accelerated and eliminated, and the valuation of the sector is at the bottom
From the perspective of the industry, the breeding end benefited from the high price cycle of animal protein brought by African swine fever in 2019, and the white feather chicken industry was at a historical profit peak throughout the year. Profit driven capacity expansion. According to the data of the poultry branch, the industry's capacity has recovered rapidly since 2019. As of March 13, 2022, the stock of grandparents' chicken (in production + reserve) is 1.7265 million, and the stock of parents' chicken (in production + reserve) is 30.878 million. The stock of grandparents' and parents' breeding chicken is at an all-time high; The price of commercial substitute chicken seedlings is 1.08 yuan / set, and the price of parent substitute chicken seedlings is 23.28 yuan / set, both at a historically low level. Looking forward to the development trend of the supply side of the industry in the future, we expect that the production capacity of the white feather chicken industry may face accelerated elimination, which is mainly due to the deep loss of chicken seedling breeding and commercial chicken terminal breeding in the whole industry. Taking chicken seedling breeding as an example, the cost of chicken seedling is about 2.5 yuan / piece, while the sales price of chicken seedling is close to 1 yuan / piece, and the deep loss of single chicken seedling is close to 1.5 yuan, Moreover, affected by the double squeeze of the rising price of feed raw materials in the upstream and the downturn of sales price in the downstream, the loss trend is further aggravating. Therefore, we predict that the behavior of delaying the elimination of breeding chickens by feathering in the white feather broiler breeding industry will be greatly reduced, and at the same time, some breeding groups with serious losses may take the initiative to eliminate production capacity. In addition, from the demand side of the industry, we expect the pig cycle to reverse in 2023, which is expected to boost the white feather broiler market. At present, the price ratio of pig to grain has reached 4.24, which is at the lowest level in history. Both piglets and fattening pigs are at the most serious loss level in history. The elimination of ternary sows in the industry is bound to accelerate. At the same time, there is great pressure on pig prices in the first half of 2022, or there may be a double bottom, and retail investors are expected to concentrate on clearing production capacity and reverse the cycle ahead of time.
As white feather broiler is one of the main substitutes for pork, its consumption demand will benefit from the reversal of pig cycle. On the whole, we believe that the white feather broiler industry is expected to usher in the bottom reversal market under the trend of accelerated elimination of production capacity and boost demand. At the same time, considering the large overall callback range of the white chicken sector in the early stage and the undervalued value, we can pay special attention to the head target.
In terms of food business, the supply side model of white chicken breeding is mature, and the industry profit center swims downstream and sinks in deep processing. From the supply side, the white feather chicken breeding industry has entered a mature stage, and the profit center of the white feather chicken industry is sinking downstream: 1) the ancestral breeding chickens of Chinese white feather broilers mainly rely on overseas introduction, the introduced varieties are relatively homogeneous, and there is little difference in breeding technology; 2) As the head white feather chicken breeding enterprises began to spontaneously extend to the downstream food deep processing after the last round of losses, so as to smooth the fluctuation of profit cycle and improve the stability of profit. From the perspective of consumption, the development potential of central kitchen business is huge, which is expected to open a new growth space for white feather chicken breeding enterprises: 1) white feather chicken is more suitable for industrial large-scale production and has the inherent advantages of developing central kitchen business. Moreover, the central kitchen adopts the mode of centralized procurement, which requires professional raw material manufacturers with large breeding volume and stable supply. 2) The demand for central kitchen is growing rapidly, which will connect more high-quality customers for the company. The central kitchen can effectively reduce the cost of raw materials through centralized procurement, processing and distribution. In 2018, the market scale of China's central kitchen has reached 275.8 billion yuan, with a five-year compound growth rate of 23.2%. In addition, the central kitchen business focuses on b-end customers, which is conducive to the development of stable supply cooperation. The cost advantage of white chicken enterprises with excellent management is expected to be further amplified.
Investment suggestion: white chicken is the leader of industrial chain integration, the food business develops rapidly, and the "buy" rating is maintained
Fujian Sunner Development Co.Ltd(002299) as a leading enterprise in the whole industry chain of white feather chicken, in terms of breeding business, the competition barrier of the whole industry chain is deep, the cost advantage and bargaining advantage are gradually highlighted, and the profitability toughness can be maintained even at the bottom of the industry cycle; In terms of food business, the company's food business is growing rapidly, with rich product categories, strong R & D ability and multi-level coverage of channels. On the basis of maintaining the traditional advantages of b-end, the company's C-end channel will also focus on making efforts to usher in the outbreak period and open new growth for the company. To sum up, we believe that as the leader of white feather chicken industrial chain integration, the proportion of its food business continues to increase. On the one hand, it will significantly improve the company's anti cycle ability and steadily move up the profit center. On the other hand, it may lead the whole industry to sink into food deep processing and build a leading chicken consumer brand in China. It is estimated that the company's net profit attributable to the parent company in 21-23 years will be RMB 459 / 16.72 / 3.341 billion, the earnings per share will be RMB 0.37/1.34/2.68, and the profit growth rate will be - 77.5% / 264% / 100% respectively, maintaining the "buy" rating.
Risk tips
Sudden large-scale uncontrollable epidemic disease; The scale expansion is less than the expected risk.
