\u3000\u30 Beijing Telesound Electronics Co.Ltd(003004) 98 Wens Foodstuff Group Co.Ltd(300498) )
Event:
Wens Foodstuff Group Co.Ltd(300498) released the annual report for 2021: during the reporting period, the total operating revenue of the company was 64.965 billion yuan, a year-on-year decrease of 13.31%, and the net profit attributable to the parent company was -13.404 billion yuan, a year-on-year decrease of 280.51%
Key investment points:
The pig industry suffered a deep loss, the poultry industry made an overall profit, and the company lost its first loss after listing. The total operating revenue of the company was 64.965 billion yuan (year-on-year – 13.31%), and the net profit attributable to the parent company was – 13.404 billion yuan (year-on-year – 280.51%). The operating revenue of the company mainly comes from broiler products and pig products, which account for 46.69% and 45.41% of the operating revenue respectively.
① in 2021, the company sold about 13217400 pigs (year-on-year + 38.46%), and the average selling price of hairy pigs was 17.39 yuan / kg (year-on-year – 48.18%). During the reporting period, the price of live pigs decreased significantly. At the same time, factors such as the continuous rise in the price of feed raw materials, the fattening of some purchased pig seedlings and the continuous promotion of pig breeding optimization pushed up the cost of pig breeding. The profit of pig breeding business decreased significantly year-on-year, resulting in deep losses.
② in 2021, the company sold 1.101 billion broilers (year-on-year + 4.76%), and the average sales price of wool chicken was 13.20 yuan / kg (year-on-year + 13.50%), and the overall market situation of broiler chicken has improved. Although the continuous rise in the price of feed raw materials has raised the breeding cost, the production performance of the chicken industry has maintained the company’s historical high level for many months, and achieved overall profitability.
③ in 2021, the company amortized the equity incentive expenses of 495 million yuan and made an impairment provision of about 2 billion yuan for the current consumable biological assets and productive biological assets (including the impairment of 1.907 billion yuan for breeding pigs), which is mainly due to the high cost of purchasing breeding pigs in the early stage and the low utilization rate of breeding pigs affected by the epidemic, resulting in the high book value and the small recoverable amount, Therefore, it is necessary to withdraw a large amount of biological asset impairment reserves. At the same time, the company increased financing in response to the downturn of the industry, and the financial expenses increased significantly year-on-year.
Pig and chicken two wheel drive has sufficient toughness, and the fundamentals of the company continue to improve. During the reporting period, the company promoted the work of strengthening the foundation of pig business, improved the biosafety prevention and control system, continuously improved the quality of sows on hand and improved the listing rate of pigs. The cost of pig breeding decreased from 15 yuan / kg in 2021q1 to 8.8-9 yuan / kg at the end of 2021; After the continuous de production of yellow chicken, the industry fundamentals are expected to regain the upward trend, and the upward price of chicken will boost the company’s performance. We judge that the inflection point of the company’s operation has passed, the fundamentals have been continuously improved, and we are optimistic about the long-term development potential of the leader.
The capital at the bottom of the cycle is stable and safe, and there is strong certainty of future capacity growth. As of December 2021, the company has 7.633 billion yuan of monetary capital and 3.926 billion yuan of trading financial assets, which can effectively control the normal pace of production and operation. In addition, the company has actively expanded financing channels, with high overall security of funds, which is expected to successfully pass the downward cycle and usher in market reversal. Wen’s existing pig farm has a completed production capacity of about 46 million, an effective feeding capacity of about 24 million at the fattening end (including cooperative farmers, family farms and modern breeding communities), a stock of about 1.1 million high-performance breeding sows, about 400000 backup sows, and more than 1 million small breeding pigs that can be used as backup sows at any time, which can ensure the continuous and stable growth of slaughter in the future. With the continuous increase of sales volume and the reduction of depreciation and amortization, the cost is expected to further explore and maintain an advantage in the industry.
In terms of profit forecast and investment rating, considering the continuous de industrialization of the production capacity of the pig industry, it is expected to usher in a cycle inflection point in the second half of 2022. The prosperity of the pig sector will rise in 2023, and the annual pig price is expected to reach 21 yuan / kg. The performance of the company will grow rapidly in 2023. Therefore, we judge that the net profit attributable to the parent company from 2022 to 2024 is RMB 1.328256.62/27.142 billion respectively, and the corresponding PE is 102.58/5.31/5.02 times respectively. At present, the company’s valuation is at the bottom, which is a good layout time point and maintains the “buy” rating.
Risk indicates the risk of excessive fluctuation of pig price; Risk of non plague impact exceeding expectations; The risk that the company’s performance is less than expected; The cost of raw materials such as corn and soybean meal in Russia and Ukraine is too high; Management decision selection risk; The risk of future uncertainty of pig cycle; Under the influence of covid-19 epidemic, the catering recovery is less than the expected decline in pork demand; Risk of inventory impairment, etc
