\u3000\u30 Beijing Telesound Electronics Co.Ltd(003004) 98 Wens Foodstuff Group Co.Ltd(300498) )
Wens Foodstuff Group Co.Ltd(300498) released the first quarterly report of 2022: during the reporting period, the total operating revenue of the company was 14.59 billion yuan, a year-on-year decrease of 13.25%, and the net profit attributable to the parent company was -3.763 billion yuan, a year-on-year decrease of 792.39%
Key investment points:
Pig prices fluctuated at a low level in the first quarter, feed costs continued to rise after the Spring Festival, and the company’s performance was under pressure. In 2022, the total operating revenue of Q1 company was 14.59 billion yuan (year-on-year – 13.25%), and the net profit attributable to the parent company was -3.763 billion yuan (year-on-year – 792.39%).
① in 2022q1, the company sold about 4023500 pigs (year-on-year + 91.85%), and the sales revenue of pigs was 6.152 billion yuan (year-on-year – 18.96%). After the Spring Festival, the price of pigs fluctuated at a low level. At the same time, due to the continuous rise in the price of feed raw materials and the downturn in consumption, the pig sector suffered a deep loss.
② in 2022, Q1 company sold 227 million broilers (year-on-year + 0.14%), and the sales revenue of hairy chickens was 6.635 billion yuan (year-on-year + 0.91%). During the reporting period, the company’s slaughter volume of yellow feather chickens remained stable, the cost increased slightly, and the sector remained profitable as a whole. From the perspective of the industry, the price of yellow feather chicken has fluctuated significantly due to the decline of demand in the short term, and the price change trend is different due to the different impact of the epidemic situation. The recent epidemic control will have a significant impact on the consumption of yellow chicken. However, from the perspective of the industry, the stock of yellow feather chicken ancestors and parents is still in a slight downward trend, and the overall fundamentals of the industry are still good.
③ during the reporting period, the company made provision for the decline in the price of pig inventory of about 960 million and the income from changes in fair value of – 490 million. At the same time, the company increased financing to cope with the downturn of the industry, increased interest expenses and increased financial expenses.
The capital at the bottom of the cycle is stable and safe, and there is strong certainty of future capacity growth. By the end of March 2022, the company had 6.66 billion yuan of monetary capital and 3.135 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.
Profit forecast and investment rating at present, the production capacity of the pig industry continues to be reduced, and the second half of 2022 is expected to usher in a cycle inflection point. In 2023, the prosperity of the pig sector will rise, and the annual pig price is expected to reach 21 yuan / kg. The performance of the company will grow rapidly in 2023. Considering the impact of epidemic control and high cost, the cost in the first quarter of 2022 is high. Therefore, we reduced the net profit attributable to the parent company from 2022 to 2024 to RMB 392 / 256.58/27.137 billion respectively, and the corresponding PE is 320.72/4.9/4.27 times respectively. Although the company is still facing losses, it is judged that the current valuation of the company is at the bottom of the whole cycle, 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; Due to the impact of the Russian Ukrainian war, the cost of raw materials such as corn and soybean meal is too high, which will affect the risk of breeding cost; 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.
