\u3000\u3 Shengda Resources Co.Ltd(000603) 609 Wellhope Foods Co.Ltd(603609) )
Event overview
The company released its annual report for 2021. During the reporting period, the company achieved an operating revenue of 29.469 billion yuan, a year-on-year increase of 23.73%; The net profit attributable to the parent company was 119 million yuan, a year-on-year decrease of 90.40%. In the fourth quarter alone, the company achieved an operating revenue of 7.706 billion yuan, a year-on-year decrease of 51.08%; On a year-on-year basis, the net profit attributable to the parent company was 70 million yuan, a year-on-year decrease of 87.26%. The company released the first quarterly report of 2022. During the reporting period, the operating revenue was 6.374 billion yuan, a year-on-year increase of 0.81%, and the net profit attributable to the parent was – 128 million yuan, a year-on-year decrease of 144.06%.
Analysis and judgment:
Steady growth in operating revenue, rising costs & falling prices, reducing profit margins. In 2021, the company achieved an operating revenue of 29.469 billion yuan, a year-on-year increase of 23.73%, mainly due to the increase in the sales revenue of the company’s feed business, poultry industry, raw material Trade and pig industry. Specifically, in terms of feed business, during the reporting period, the revenue was 15.357 billion yuan, a year-on-year increase of 26.81%, and the gross profit margin decreased by 0.86pct to 9.42%; In terms of poultry industry, during the reporting period, the revenue was 8.255 billion yuan, an increase of 15.14% year-on-year, and the gross profit margin decreased by 4.48 PCT to 0.63%, which was caused by the high upstream cost and the sluggish downstream consumption squeezing the profit space; In terms of raw material trade, during the reporting period, the revenue was 3.677 billion yuan, a year-on-year increase of 16.68%, and the gross profit margin decreased by 0.38pct to 5.00%; In terms of pig industry, during the reporting period, the revenue was 1.488 billion yuan, an increase of 96.60% year-on-year, which was caused by the sharp increase in the number of pigs sold, and the gross profit margin decreased by 46.79pct to – 15.99%, which was caused by the decline in the price of pigs during the reporting period; Related businesses achieved a revenue of 676 million yuan, a year-on-year increase of 11.17%, and the gross profit margin decreased by 1.44pct to 17.01%.
Fearless of high raw material prices, the net profit per ton is leading the industry. Feed business is the first main business of the company. In 2021, the total feed of the company’s controlling and participating enterprises
The total output was 8.03 million tons, with a year-on-year increase of 15.04%. The sales volume of feed outside the consolidated range was 4.331 million tons, with a year-on-year increase of 12.54%. Among them, 1.9724 million tons of pig feed were exported, with a year-on-year increase of 26.44%; The export of poultry feed was 1428300 tons, a year-on-year decrease of 1.29%; 213400 tons of ruminant materials were exported, with a year-on-year increase of 1.38%; Other materials exported were 4.331 million tons, a year-on-year increase of 12.54%. In 2021, the price of feed raw materials fluctuated at a high level and the breeding industry was depressed, resulting in a significant slowdown in the growth rate of feed consumption demand in the second half of the year. In the face of the rise in raw material prices, the company gave full play to the leading enterprise brand and technical advantages, accelerated the pace of change, strengthened the collaborative combat ability of multiple departments, and significantly enhanced the core competence of feed business. Under the environment of high raw material prices, the net profit per ton is still the industry leader. We believe that the feed business of the company covers pigs, birds and ruminants, and is multi-line and parallel, which can effectively reduce the impact of changes in the pattern of the breeding industry on the company. In addition, the cooperative combat ability of all departments of the company is further enhanced, and the upgrading of technical services promotes the proportion of customers of large-scale farms, which is expected to promote the company to achieve the goal of increasing feed sales by 15% in 2022.
Calmly face rational decision-making, the industry is still profitable at the bottom. In 2021, feed prices were high, terminal consumption was sluggish, and the prosperity of livestock industry was low
Down to the trough. Faced with such challenges, the company faces them calmly and makes rational decisions. In terms of meat and poultry business, the company slowed down its expansion speed, further consolidated its operating capacity, reduced costs, systematically improved the layout of the industrial chain and steadily expanded its market share on the basis of ensuring the safety margin. In 2021, the company’s controlling and participating enterprises slaughtered 693 million white feather broilers, a year-on-year increase of 8.5%, and the ratio of breeding and slaughtering capacity exceeded 90%; Controlling and participating enterprises produced and sold 1.8 million tons of broiler segments, a year-on-year increase of 7.0%; Controlling and participating enterprises produced 28000 tons of conditioning products and cooked food, with a year-on-year increase of 7.3%, of which 3488 tons of cooked food were exported, with a year-on-year increase of 15.9%. In terms of pig business, the company eliminated inefficient production capacity for the first time, reduced production scale, focused on pig farm management and improved breeding performance, and significantly reduced costs. In 2021, the pig industry realized a gross profit of – 238 million yuan, a year-on-year decrease of 46.79 percentage points, and achieved less losses in the same industry. We believe that at present, the pig price recovers slowly, the feed raw material price drops slightly, and the cost pressure of the company is relieved slightly. In the future, with the recovery of pig price, the profitability of the company will be improved; In addition, under the severe epidemic situation, outdoor catering is limited, and the cooked food of prefabricated vegetables is hot. We expect that the company’s cooked food related business will grow in the wind, which is expected to further thicken the company’s profits.
Investment advice
Our analysis: (1) in terms of pig business, the price of pigs has gradually recovered. With the expansion of the company’s pig breeding scale and the growth of subsequent pig slaughter, the revenue of pig business will further increase and the profitability will be improved; (2) In terms of feed business, although the pig production capacity has been eliminated, the production capacity is still considerable, and the feed demand is still relatively strong; (3) The hot market of prefabricated vegetables and cooked food will drive the growth of the company’s cooked food business. Based on this, we will increase the company’s operating revenue from 33.533/38.881 billion yuan to 35.164/40.730 billion yuan in 22-23 years, increase the 24-year operating revenue to 47.273 billion yuan, increase the net profit attributable to the parent company from 507 / 1080 million yuan to 741 / 1180 million yuan in 22-23 years, and increase the forecast net profit attributable to the parent company in 24 years to 1.452 billion yuan, The EPS of 22-23 years was raised from 0.55/1.17 yuan to 0.80/1.28 yuan, and the EPS of 24 years was predicted to be 1.57 yuan. The share price was 7.95 yuan on April 29, 2022, corresponding to 10 / 6 / 5x PE of 22 / 23 / 24 years respectively, maintaining the “buy” rating.
Risk tips
Raw material price fluctuation risk, livestock price fluctuation risk, major epidemic risk, and industrial pattern adjustment risk caused by environmental protection policies.
