\u3000\u30 China High-Speed Railway Technology Co.Ltd(000008) 95 Henan Shuanghui Investment & Development Co.Ltd(000895) )
Core view: the slaughtering industry is strong, and the development space of meat products is broad
Core logic 1: the slaughtering industry is always strong, and the scale of the company is leading in the industry, which will fully benefit from the improvement of concentration
(1) the proportion of leading enterprises is relatively low, and the industry concentration has great potential to improve. The market share of leading enterprises in China’s slaughtering industry is significantly lower than that of developed countries such as the United States and Denmark, and will take the lead in benefiting from the improvement of market concentration in the future. (2) At present, the company is the largest slaughtering enterprise in China, and the pig slaughtering capacity is still improving steadily. In 2020, the income scale of Shuanghui raw, fresh and frozen products will reach more than twice that of the second-largest enterprise, significantly leading the slaughtering industry; The gross profit margin of fresh frozen products is significantly higher than that of the same industry, and the competitiveness is continuously improved. (3) The nationwide layout has been completed, and the slaughtering bases are all over the country. At present, the company has established a slaughtering capacity of 23 million heads in the country, with the capacity scale leading in the country, and can quickly undertake the expansion of pig slaughtering business.
Core logic 2: the product structure continues to upgrade, and the market of low-temperature meat products is broad
(1) the share of the company’s low-temperature meat products still has room to rise. The market share of Shuanghui low-temperature meat products is about 15%, the market share exceeds the sum of the last ten competitors, and the market share of Cr5 in the United States is 38.67%. There is still room for industry concentration to rise. (2) High temperature products lead the market and have a stable position. Among high-temperature meat products, Shuanghui is far ahead with a market share of 63%. (3) Continue to develop new products and enhance market competitiveness. Shuanghui has strong R & D capability. At present, it has developed more than 1000 products, and the annual sales volume of new products accounts for more than 10% of the sales volume.
Core logic 3: inventory dragged down performance in 2021, and inventory management in the future will be conducive to performance recovery. Inventory loss caused by downward pork price is the main reason for poor performance in 21 years. (1) Pork prices peaked in October 2020. The sharp decline in pork prices in 2021 led to large inventories and dragged down the realization of profits. (2) The provision for impairment of raw materials and the actual loss of finished products from warehouse dragged down the performance in 2021. Due to the sharp decline in pork prices in 2021, the inventory of raw materials is forced to withdraw the provision for impairment, and the loss of finished products in the process of delivery will be included in the current profit and loss. (3) In 2021, the company digested the inventory loss of finished products by rolling stock out. At the end of 2021, the company’s finished product inventory was 3.637 billion yuan, a year-on-year increase of – 33.09%, and the finished product inventory is gradually shrinking. (4) In 2021q4, the company significantly reduced the procurement of imported meat from ROTEX to alleviate the pressure on inventory.
Core logic 4: expand the breeding business upstream and further strengthen the integration of upstream and downstream. The company will issue shares in 2020 and raise funds for broiler industrialization and pig breeding projects. The above breeding projects will further strengthen the company’s control over the raw material cost of meat products, realize the layout of the whole industrial chain from upstream breeding to downstream meat products processing, and strengthen the synergy of various business sectors.
Investment advice
The current share price corresponds to 16 / 14 / 13 times of PE in 22-24 years. It is expected that the concentration of pig production will be increased in the future, the situation of low pork prices will be improved, the high opening rate of the company’s slaughtering business will be maintained, and the income of fresh products is expected to resume growth; The meat products business will maintain good growth and maintain the “recommended” rating.
Risk tips
The gross profit margin of slaughtering business fell more than expected, the development of meat products business was less than expected, food safety problems, etc.
