Key investment points
Market review this week
Last week (2022 / 1 / 3-2022 / 1 / 9), the CSI 300 index fell by 2.39%, and the agriculture, forestry, animal husbandry and fishery index rose by 1.56% over the same period, outperforming the CSI 300 index by 3.95 percentage points, ranking eighth among 28 Shenwan industries.
In terms of sub sectors, last week, the fishery / livestock and poultry breeding / Shenzhen Agricultural Products Group Co.Ltd(000061) processing / animal health care / feed / planting sectors increased or decreased by 4.82%, 3.94%, 2.13%, 3.46%, – 1.86% and – 3.78% respectively.
Core ideas of this week
[pig breeding] we believe that pig prices may continue to fluctuate and decline before the year. In the recent peak season, the pig price has not been prosperous and has continued to decline. The slaughterhouse has general enthusiasm for pig collection and strong sentiment of price reduction and acquisition. In addition, the frozen meat inventory is high, which reflects that the market demand for pork consumption is lower than expected. It is expected that the pig price will accelerate to decline from the middle of the month. After the Spring Festival, the bottom will continue to be affected by the off-season of meat consumption. There will be a second bottom in March and a weak recovery in April and may. Breeding losses superimposed on the tightening of cash flow and the impact of local non plague conditions, or accelerate the de industrialization of industry capacity, and the bottom of this cycle is expected to appear in advance. We will continue to pay attention to the month on month changes in the stock of fertile sows.
[white feather broiler] before the Spring Festival, intermediate traders have replenishment sentiment, but the support of chicken frozen products is limited. They are concerned about the covid-19 epidemic in various regions before the Spring Festival. It is expected that the price of wool chicken will fluctuate between 7.6-8.0 yuan / kg next week. At present, the price of chicken seedlings is low, chicken breeding enterprises continue to lose money, and poultry breeding enterprises begin to support the price. It is expected that the price of chicken seedlings will rebound slightly next week.
[animal protection] new progress in research and development of non plague vaccine or heat of catalytic plate. At present, enterprises have submitted an application for emergency evaluation of African classical swine fever genetic engineering subunit vaccine to the Ministry of agriculture and rural areas. Veterinary drug review includes general review, priority review, emergency evaluation and filing review. Emergency evaluation refers to the emergency evaluation initiated by the Ministry of agriculture and rural areas for the veterinary drugs required for the emergency disposal of major animal epidemics. If it is recommended that they can be used in an emergency, the animal husbandry and Veterinary Bureau of the Ministry of agriculture and rural areas may issue technical standard documents after performing the approval procedures, and the relevant veterinary drug production enterprises shall apply for a temporary veterinary drug product approval number in accordance with the measures for the administration of veterinary drug product approval numbers. We believe that subunit vaccines have absolute advantages in terms of safety. Generally, there will be no problem similar to the strengthening of gene deletion vaccine strains. Once the emergency evaluation is passed, it will catalyze the upward heat of the whole animal protection sector. If the plague vaccine is not successfully commercialized, it will drive the capacity expansion of the whole vaccine sector. We expect that under the background that 650 million pigs are fully immunized with non plague vaccine, it will give birth to more than 10 billion market space, add more than 5 billion net profit, and be divided up by several major vaccine enterprises, and the industry competition pattern may usher in major adjustments.
[seed industry] the central rural work conference in 2021 proposed to vigorously expand soybean and oil production, and Heilongjiang will increase the soybean area by 10 million mu in 2022. We believe that the increase of soybean planting area is equivalent to the corn supply side reform. In 2022, the corn planting area may decrease, and the downstream breeding capacity will maintain a high level to support the feed demand. In 2022, the corn price may fluctuate at a high level, and there is little possibility of sharp decline. The high grain price may drive the prosperity of corn seeds upward.
Investment advice
[pig breeding] cost reduction and efficiency increase in 2022 is still the main theme of the industry. It is recommended to pay attention to the enterprises that “can continuously increase the number of sows and production efficiency” and “improve the cost fastest” in the next 1-2 quarters.
[white feather broiler] the industrial chain has experienced a loss for one year. The deep loss in the downstream inhibits the enthusiasm to make up the fence. The decline in the price of chicken seedlings affects the profits of the incubator, or forces the chicken breeding farm to take the initiative to reduce the production capacity. We may see the month on month contraction of the supply of chicken seedlings in the third quarter of 2022, and follow-up pay attention to the changes in the stock of grandparents and parents. It is recommended that enterprises focusing on the layout of the whole industrial chain business and the target of the upstream main chicken seedling sales business.
[yellow feather broiler] even if the industry accelerates the clearing of production capacity at the low point of the cycle, the head enterprises still expand against the trend. It is expected that the market share of the head enterprises will further increase after the gradual withdrawal of free range farmers in the future. It is recommended to pay attention to the leading leaders in continuous capacity expansion and cost control, as well as enterprises that comply with the development trend of frozen fresh sales.
[dynamic insurance] the sector has fallen to a reasonable range due to the drag of pig price. It is expected that the reversal of pig price in the second half of 2022 will lead to the upward prosperity of the industry, and the sector is expected to usher in valuation repair. It is suggested to lay out at a low level. It is recommended to focus on Pulike Biological Engineering Inc(603566) with obvious advantages in subunit vaccine R & D and industry leaders with rich product reserves.
[seed industry] with the intensive introduction of favorable policies and the improvement of supply and demand fundamentals, the industry has ushered in an upward cycle. It is expected that high-quality seed enterprises will usher in a performance release period in the next few years, the curtain of genetically modified organism breeding will open, the corn seed industry will usher in strong capacity expansion expectations, and the leading seed enterprises may usher in a high-speed growth stage. It is recommended to pay attention to seed enterprises with rich transgenic technology and variety reserves.
Risk tips
Covid-19 epidemic spread risk, international situation change risk, policy implementation less than expected risk, etc.
