\u3000\u3 Jointo Energy Investment Co.Ltd.Hebei(000600) 195 China Animal Husbandry Industry Co.Ltd(600195) )
Events. 1) The company and Zhongmu Nanjing Animal Pharmaceutical Co., Ltd. plan to jointly invest with Muyuan Foods Co.Ltd(002714) to establish Zhongmu Yuanyuan, with a proposed registered capital of 120 million yuan. The three companies respectively contribute 58.68 million yuan / 3.72 million yuan / 57.6 million yuan in cash, accounting for 48.9% / 3.1% / 48% of the registered capital respectively. Nanjing Pharmaceutical is a wholly-owned subsidiary of China Animal Husbandry Industry Co.Ltd(600195) and China Animal Husbandry Industry Co.Ltd(600195) is the controlling shareholder of the company after the establishment of Zhongmu muyuan.
2) after the establishment of zhongmuyuan, it is planned to invest in the construction of Nanyang production base project of zhongmuyuan Animal Pharmaceutical Co., Ltd., which is mainly engaged in veterinary drug production, veterinary drug management, veterinary drug R & D and technical consulting services. The construction investment of the project is 470 million yuan. The construction fund of the project is solved by the registered capital of zhongmuyuan, and the insufficient part is solved by zhongmuyuan with self raised funds.
Join hands with the breeding leader Muyuan Foods Co.Ltd(002714) , and the layout of veterinary chemical medicine business will go to the next city. Zhongmu and muyuan are respectively China’s leading animal protection enterprise and China’s largest pig breeding enterprise. After the two sides jointly set up Zhongmu muyuan, they will invest in the construction of Nanyang production base of Zhongmu Muyuan Animal Pharmaceutical Co., Ltd. the total construction period of the project is expected to be 2 years, including 1 year of engineering construction period. After the project is completed, the R & D and production capacity of veterinary chemicals of the company is expected to continue to improve, and the market share and product influence of the industry are expected to continue to be consolidated and strengthened, At the same time, as industry leaders, the two sides of the joint venture form effective complementarity in the upstream and downstream, which is expected to promote the coordinated and accelerated development of their respective advantageous business areas.
Demand drives the high growth of chemical medicine business, and the large-scale production capacity opens up new growth space. Benefiting from the comprehensive prohibition of resistance at the feed end and the prominent trend of large-scale breeding in 2020, the demand structure of the veterinary chemical industry has been optimized, and the demand for high-quality therapeutic veterinary drugs has increased rapidly. The company’s chemical medicine business is dominated by macrolide emerging veterinary drugs. The preparation and API have formed an integrated layout, with excellent cost control and API supply and quality assurance ability. The new production capacity of API in Inner Mongolia in the next two years and the production base project to be invested in this time will be gradually put into operation, opening up new space for growth. At the same time, the increase of the proportion of preparation products is expected to promote the continuous improvement of the profitability of chemical medicine business; On May 31, 2022, the time limit for the new GMP standard is approaching, the production standard of the chemical pharmaceutical industry is greatly improved, and the backward production capacity that fails to meet the new standard may be eliminated. The leading advantage is expected to become increasingly prominent.
The market of foot-and-mouth disease has gradually increased, the incentive mechanism has been improved, and the development vitality has been released. Under the background of the effective promotion of the policy of “fight first and make up later” and the gradual elimination of the policy of political seedling collection in 2025, the development opportunities of market seedlings are clear. The company has arranged the market seedlings of foot-and-mouth disease since 2017. While the political seedling collection has maintained a leading position, the market seedlings have been gradually expanded. The relocation and upgrading of Lanzhou plant was completed in 2021q2. The construction of phase II and phase III production lines will be steadily promoted in the next two years, the scale field customers will expand rapidly, and the market seedling sales will continue to grow rapidly. Since 2017, the company has made frequent national reform actions. With the optimization of various business lines, the company has continuously integrated the team, improved incentives, and improved the efficiency of precision services. The incentive mechanism for the reform of state-owned enterprises promoted by the foreign assets supervision and Administration Commission, including “excess profit distribution” and “contracting”, is expected to be implemented in 2022, which will effectively improve the vitality of the core team.
Profit forecast: as a leading enterprise in China’s animal health insurance, the company releases its development vitality through national reform, promotes the vaccine business with the dual driving force of political and mining advantages and market-oriented layout, and the demand promotes the high growth of chemical medicine business. This time, the company will work together with muyuan to complement its advantages and accelerate its growth in a coordinated manner. It is estimated that the company’s net profit attributable to the parent company from fy2021 to 2023 will be RMB 570 / 690 / 860 million, with an increase of 34.3% / 22.7% / 23.4%, corresponding to EPS of 0.56/0.68/0.84 yuan / share and fy2022pe17.00 yuan / share respectively 3x, maintain the “buy” rating.
Risk tip: the outbreak of epidemic diseases in the breeding industry, the repeated covid-19 epidemic, and the progress of production capacity construction are less than expected.
