\u3000\u30 Beijing Telesound Electronics Co.Ltd(003004) 98 Wens Foodstuff Group Co.Ltd(300498) )
Report summary
Wens Foodstuff Group Co.Ltd(300498) was founded in 1983. Now it has developed into a 100 billion agricultural and animal husbandry enterprise group with livestock and poultry breeding as its main business and multi-point layout. It is one of the first batch of 151 national key leading enterprises in agricultural industrialization in China; The actual controller of the company is a member of the Wen family. As of May 2021, the company holds 16.31% of the shares in total. As of June 30, 2021, Wens Foodstuff Group Co.Ltd(300498) has 399 holding companies, 46700 cooperative farmers (or family farms) and total assets of 103454 billion yuan in more than 20 provinces (cities, autonomous regions) across the country. In 2021, the total number of pigs and chickens sold by the company was 13.22 million and 1.101 billion respectively, ranking a leading position in the industry.
Pig production continued to improve, and the breeding cost showed an obvious downward trend: in the early stage, affected by the outbreak of African swine fever, due to the lack of epidemic prevention experience, the low level of biosafety prevention and control in some pig farms and the old infrastructure in some pig breeding farms, the company’s pig breeding system was damaged, the slaughter volume of meat pigs decreased significantly, and the breeding cost soared. Through nearly two years of efforts, the company’s pig raising business has been basically repaired: (1) the slaughter volume of pigs has recovered steadily: 13.22 million pigs were sold in 2021, exceeding the plan of 12 million pigs formulated at the beginning of the year; (2) The quality of sows purchased by the company will be optimized to meet the needs of 1.1 million sows in 2021-may, and the company will be able to continue to produce 1.1 million sows in the future; (3) The cost of pig breeding shows a downward trend: in November 2021, the complete cost of pig is about 8.8 yuan / kg, a decrease of about 30% compared with the first quarter of 2021. It is expected that the company’s pig breeding cost will gradually return to normal in 2022, and with the further decline of depreciation and amortization, the cost still has room to decline; (4) Effective improvement of biosafety prevention and control capacity: the company has fully recovered the problems existing in the early stage of non plague, and fully guaranteed the orderly production of pigs by upgrading hardware facilities and strengthening epidemic supervision.
The production performance of broilers has increased steadily, and the transformation and upgrading is progressing smoothly: affected by the h7n9 avian influenza incident, the company’s broiler slaughter volume decreased slightly in 2017 and 2018, but in 2019, the company immediately made adjustments, seized the opportunity of China’s shortage of meat food, actively expanded production, and achieved a new breakthrough in the scale of chicken industry. (1) Marketing volume: in 2021, the company sold about 1.101 billion broilers, a year-on-year increase of 6%, a record high, with a listing rate of about 95%, ranking the highest level in history for many consecutive months; (2) Breeding cost: Recently, the company has made significant cost advantages by effectively adjusting the breeding structure, increasing the proportion of low-cost and marketable fast-growing and medium-speed breeding, actively developing large-scale breeding, and taking measures such as reducing surrogate breeding fees. The overall complete cost target of wool chicken in 2022 is to be reduced to 6.1 yuan / kg, which will further consolidate its competitive advantage; (3) Transformation and upgrading: at present, the company’s broiler slaughtering capacity is steadily increasing, and the cumulative completed single shift capacity has increased to 285 million, which strongly supports the development of fresh product business. At the same time, the company has deployed the “532” proportion in the fifth five year plan, and the proportion of fresh sales has reached 14% in 2021. In the future, the company will continue to make efforts to transform and upgrade the poultry industry, and it is preliminarily planned to sell nearly 200 million fresh products in 2022.
Capital management is upgraded and multi-point layout is guaranteed: in the face of possible continuous periodic fluctuations in the future, the company has made sufficient preparations for capital management and supporting business: (1) capital: by the end of January 2022, the company has about 12 billion yuan of available funds. In addition, the company has applied for many types and amounts of unused financing instruments, which can fully support the capacity expansion of subsequent main businesses; (2) Supporting business: in addition to the breeding industry, the company also supports dairy, veterinary medicine, agricultural and animal husbandry equipment, financial investment and other businesses. These businesses have stable performance, provide a steady stream of cash flow for the company, and are a reliable reserve force for the company to maintain the advantages of its main business.
We estimate that the number of pigs sold by the company in 21-23 years will be 13.22 million, 18 million and 27 million respectively, the number of broilers sold will be 1.156 billion, 1.214 billion and 1.275 billion respectively, and the operating revenue of the company in 20212023 will be 63.68 billion yuan, 72.44 billion yuan and 99.48 billion yuan respectively; The net profit attributable to the parent company was -10.6 billion yuan, 2.74 billion yuan and 12.23 billion yuan respectively, with a year-on-year change of – 242.7%, 125.9% and 345.7%. In 2022, the average PE of comparable companies was 81.67x. We expect the company’s EPS from 2021 to 2023 to be -1.66/0.43/1.92, and the corresponding PE of the current stock price is -13.33/51.39/11.53. Considering that the company, as the double leader of China’s pig and broiler breeding industry, has significant advantages in breeding scale, cost control and convenient industrial chain layout, it can give the company a certain valuation premium. For the first time, give a “buy” rating.
Risk tips: livestock and poultry diseases, product price fluctuation, feed raw material price fluctuation, repeated covid-19 epidemic and untimely update of information and data used in the research report..
