\u3000\u3 China Vanke Co.Ltd(000002) 157 Jiangxi Zhengbang Technology Co.Ltd(002157) )
[matters]
Recently, Jiangxi Provincial Department of agriculture and rural areas issued five measures to increase financial support for pig production enterprises. Including: 1) improve the political position. Pigs are an important pillar industry in Jiangxi Province, and actively play the role of financial “blood transfusion” and “blood circulation”. 2) Increase credit support. It is not allowed to limit loans, withdraw loans or cut loans blindly. It is not allowed to support the renewal of loans without repayment of principal for maturing loans, and it is not allowed to blindly downgrade the main body’s rating. 3) Implement the reporting system for Bank adjustment of credit scale. For national and provincial leading enterprises in pig industrialization, if they adjust the credit scale, they should coordinate and communicate with the production enterprises in advance to ensure the normal and orderly production and operation of the enterprises. 4) Innovative service model. Support banking institutions to steadily carry out pilot mortgage loans for land management rights, breeding pens, large-scale breeding machinery and live pigs. 5) Continuously optimize services. On the basis of adhering to market-oriented operation and risk control, agricultural credit guarantee institutions have simplified guarantee loan procedures, shortened processing time and ensured that loans are available as soon as possible.
[comments]
Affected by many factors such as the depressed pig price, the company suffered a substantial loss. According to the performance forecast of the company in 2021, the annual net profit attributable to the parent company is expected to lose 18.2-19.7 billion, a year-on-year decrease of 417443%. Among them, 1) the increase of pig sales combined with the decrease of sales price affected the profit of 8.9 billion. In 2021, the company sold 14.93 million pigs, a year-on-year increase of 56%, and the average sales price was 16.6 yuan / kg, a year-on-year decrease of 16.1 yuan / kg; 2) Eliminate fertile sows, with a loss of 6.2-6.8 billion; 3) Deal with inefficient leased sites, with a loss of about 1.5 billion; 4) The provision for inventory falling price is about 1.2 billion; 5) Amortization of equity expenses is about 280 million. As of the third quarter of 2021, the company’s shareholders’ equity was 14.7 billion, and the asset liability ratio reached 75.2%. The operation was facing difficulties.
Jiangxi Financial Holding provides liquidity support, and the breeding industry is expected to usher in a reversal in the second half of the year. In March 2022, Jiangxi Financial Group and Zhengbang signed the strategic cooperation agreement on financial support. In principle, the intended target of cooperation scale is no less than RMB 5 billion, providing liquidity support for the company and Rural Revitalization. According to choice data, since May 2021, pig breeding enterprises have continued to suffer losses. By the end of March 2022, the pig feed ratio is about 3.5, and the loss of a single pig is about 340 yuan / head. Due to the seasonal impact, it is expected that the pig price will remain low in the second quarter. With the reduction of production capacity, the pig price is expected to stabilize and recover in the second half of the year. Overall, Jiangxi Zhengbang Technology Co.Ltd(002157) is expected to usher in the reversal of the plight of the industry and the company.
Jiangxi Zhengbang Technology Co.Ltd(002157) is a leading pig breeding enterprise in China, which has suffered significant losses due to the low pig price and other factors. We expect that Jiangxi Zhengbang Technology Co.Ltd(002157) is expected to survive the cold winter as Jiangxi Financial Holding and bank provide liquidity support to the company, and return to profitability as the follow-up pig cycle goes up. We expect that from 2021 to 2023, the company will realize an operating revenue of 47.6/42.4/63.2 billion, a net profit attributable to the parent of – 17.8 / – 19 / 9.7 billion, a corresponding EPS of -5.56 / – 0.59/3.08 yuan and a PE of – / – / 2.5 times, giving a “overweight” rating.
[risk tips]
Macroeconomic downside risk;
Corn, soybean meal and other Shenzhen Agricultural Products Group Co.Ltd(000061) continuous upward risk;
Capacity removal was less than expected.
