\u3000\u3 China Vanke Co.Ltd(000002) 567 Tangrenshen Group Co.Ltd(002567) )
Event:
Tangrenshen Group Co.Ltd(002567) released the annual report of 2021 and the first quarterly report of 2022: in 2021, the company realized an operating revenue of 21.74 billion yuan, an increase of 17.4% year-on-year, and realized a net profit attributable to the parent company of -1.15 billion yuan, which turned from profit to loss year-on-year. In 2022q1, the company realized an operating revenue of 4.91 billion yuan, a year-on-year increase of – 2.4%, and a net profit attributable to the parent company of – 150 million yuan, a year-on-year change from profit to loss.
Key investment points:
Feed business volume and gross profit margin increased. In 2021, the company’s feed business achieved a sales revenue of 17.51 billion yuan, a year-on-year increase of 24.6%, accounting for 80.5% of the company’s total revenue. The export volume of feed was 5.1 million tons, with a year-on-year increase of 200000 tons, or 4.1%, of which the sales volume of pig feed increased by 55.4% year-on-year. The average sales unit price of feed was 3433 yuan / ton, a year-on-year increase of 9.6%, mainly due to the rise in the price of feed raw materials and the increase in the price of products. The gross profit margin of feed business was 7.5%, with a year-on-year increase of 0.3pct, mainly due to the company’s adjustment of feed product structure.
The number of live pigs has increased significantly, and building breeding has begun to take shape. In 2021, the company sold 1.542 million pigs, a year-on-year increase of 50.6%, including 628000 piglets and 915000 fat pigs. The operating revenue was 3.47 billion yuan, a year-on-year decrease of 53.7%, mainly due to the sharp decline in pig prices. The gross profit margin of pig breeding business was – 2.5%, with a year-on-year decrease of 53.7pct and a large loss, mainly due to 1) the high cost of outsourcing some piglets in the first half of pig breeding; 2) Pig breeding confirmed a loss of 330 million yuan from inventory decline, a loss of 90 million yuan from the impairment of productive biological assets, and a loss of – 10 million yuan from the disposal of fixed assets due to the reconstruction and expansion of pig farms due to the expansion of breeding scale. From 2022 to 2023, the company aims to sell 2, 3.5 and 5 million pigs, and the long-term plan is to sell 10 million pigs, mainly developing the production capacity of core consumption areas such as Hunan and Guangdong. In 2021, the 1 million building breeding project of Longhua agriculture and animal husbandry, an excellent breeding subsidiary, has been put into operation, which can effectively improve the breeding efficiency and the productivity utilization of pig breeding land in the south, reduce the breeding cost, and have high replicability in the future.
The sales volume of live pigs in 2022q1 was 383000, a year-on-year decrease of 17.2%. Among them, the sales volume of commercial pigs was 358000, with a year-on-year increase of 1.7 times. The sales volume of piglets was 26000, compared with 332000 in the same period last year. The marketing volume was in line with the expectation. The company plans to sell 2 million pigs this year. From the perspective of rhythm, it is expected to be 40% in the first half of the year and 60% in the second half of the year. The operating income of pig business in 20221q1 was 510 million yuan, a year-on-year decrease of 46.3%. The gross profit margin of 2022q1 company was 4.3%, a year-on-year decrease, and the net profit attributable to the parent was – 150 million yuan, mainly due to the low price of pigs. The asset impairment loss recognized in the first quarter was less, amounting to 5.18 million yuan.
The capital is relatively abundant to ensure the continuous expansion. In 2021, the company successfully completed the non-public offering and successfully raised 1.55 billion yuan; Jointly set up an industrial fund of 1 billion yuan with social capital; A new medium and long-term bank project loan of 1.11 billion yuan was added to support the development of the company’s pig industry. As of the end of the first quarter, the company’s book monetary capital was 1.37 billion yuan, and the total amount of funds to be raised in the fixed increase plan in April was no more than 1.22 billion. If the implementation of the additional issuance is completed, it will further enrich the company’s financial strength and provide sustainable momentum for future capacity expansion.
Profit forecast and investment rating: the company’s main feed industry has grown steadily, the proportion of fat pigs in pig business has increased significantly, the pig cycle is poised to rise, and the pig breeding in buildings has achieved initial results. It is expected to be replicated in other production areas in the future to improve the breeding efficiency; Based on the principle of prudence, without considering the impact of fixed increase on its performance, it is estimated that the net profit attributable to the parent company from 2022 to 2024 will be RMB 0.7/25.3/2.17 billion respectively, and the corresponding PE will be 132.7/3.6/4.2 times respectively, maintaining the “buy” rating.
Risk warning: non plague and other epidemic risks; The slaughter volume of pigs is less than the expected risk; Risk of long-term sharp rise in the cost of feed raw materials; Pig price fluctuation risk; The company’s performance is lower than the expected risk.
