\u3000\u3 Jointo Energy Investment Co.Ltd.Hebei(000600) 975 Hunan New Wellful Co.Ltd(600975) )
Key investment points
Release of major asset restructuring plan
On April 28, 2022, Hunan New Wellful Co.Ltd(600975) issued a major asset restructuring plan, including issuing shares, paying cash to buy assets and raising supporting funds.
(1) assets to be purchased through the combination of shares to be issued and cash payment:
① 100% equity of Tianxin seed industry and 2 million yuan of state-owned exclusive capital reserve;
② minority equity of four subsidiaries of Tianxin seed industry: 48.20% equity of Yuanjiang Tianxin, 39.00% equity of Hengdong Tianxin, 49.00% equity of Jingzhou Xiangmu and 46.70% equity of Linxiang Tianxin;
③ 100% equity of 6 project companies invested by Hunan New Wellful Co.Ltd(600975) Fund: 100% equity of Hunan Tianhan, 100% equity of Chenzhou xiasitian, 100% equity of Xinhua Jiuyang, 100% equity of Hengdong Xinbang, 100% equity of Hunan tianqin and 100% equity of Longshan Tianhan.
(2) issuing shares to raise supporting funds:
Arrangement of raised funds: the company plans to raise supporting funds by non-public issuance of RMB ordinary shares by inquiry to no more than 35 qualified specific investors. The total amount of supporting funds raised shall not exceed 100% of the transaction price of assets purchased by the shares issued this time, and the number of shares issued by raising supporting funds shall not exceed 30% of the total share capital of the listed company before this reorganization.
Purpose of raised funds: after deducting the expenses related to the reorganization, the supporting funds raised this time are intended to be used for the expenses of relevant intermediaries and relevant taxes, cash consideration, supplementary working capital and debt repayment, project construction of the target company, etc. Among them, the proportion used to supplement working capital and repay debts will not exceed 25% of the transaction price or 50% of the total amount of supporting funds raised. If the securities regulatory authority issues new regulations or regulatory opinions on the purpose of raising supporting funds in the future, the company will adjust it according to the new regulations and regulatory opinions.
Asset injection or optimization of the company’s industrial structure to improve business competitiveness
(1) the problem of horizontal competition has been solved. Hunan modern agriculture group is the indirect controlling shareholder of Hunan New Wellful Co.Ltd(600975) and Tianxin seed industry is the holding subsidiary of modern agriculture group. A horizontal competition relationship is formed between Hunan New Wellful Co.Ltd(600975) and Tianxin seed industry. After the completion of this asset restructuring, Tianxin seed industry will become a Hunan New Wellful Co.Ltd(600975) subsidiary, which solves the problem of horizontal competition between the two and effectively protects the interests of the company and shareholders.
(2) improve the competitiveness of main business. Tianxin seed industry, Yuanjiang Tianxin, Jingzhou Xiangmu, Hengdong Tianxin, Linxiang Tianxin and other companies, the subject of this transaction, are mainly engaged in pig breeding, pig breeding and sales, livestock and poultry breeding technical services, road goods and other businesses. Tianxin seed industry is the earliest large-scale and intensive professional breeding company in China, one of China’s large pig breeding enterprises and the national pig core breeding farm. At present, Tianxin seed industry has a core group of thousands of breeding pigs, and the breeding pig market is spread in five core regional provinces of Hunan, Henan, Jiangxi, Fujian and Zhejiang, as well as other provinces in the country. It is conservatively estimated that Tianxin seed industry has 60000 basic sows and an annual production capacity of 1.5 million (including 200000 breeding pigs). If Hunan New Wellful Co.Ltd(600975) completes the acquisition of Tianxin seed industry, Hunan New Wellful Co.Ltd(600975) pig breeding business is expected to further develop and expand, which will help extend the company’s industrial chain and enhance the competitiveness of breeding links. If we consider the injection of target assets such as 7200 basic sows in Yuanjiang Tianxin, 4800 basic sows in Jingzhou Xiangmu and 6000 basic sows in Hengdong Tianxin, a subsidiary of Tianxin seed industry, the company is expected to maintain a high growth in the number of pigs and further improve the market share in the next few years. In the future, Hunan Modern Agricultural Industry Holding Group is expected to form an adult breeding group enterprise with a scale of 8-10 million and obvious regional competitive advantage.
Profit forecast and investment suggestions
(1) profit forecast:
The main sources of revenue and gross profit contributed by the company’s pig breeding business:
① forecast of marketing volume: the company has 60000 breeding sows and 30000 reserve sows by the end of 2021. Considering that Tianxin seed industry and other trading parties will contribute more than 70000 basic sows in 2022, Psy is calculated at 20, plus discount and dead Amoy, and the marketing volume is expected to reach 2.2 million in 2022. In the future, the company aims to become the largest pig breeding enterprise in Hunan during the 14th Five Year Plan period. At present, the production capacity is expanding. The company may further increase the sow reserve. It is estimated that the number of sows will reach 3.5 million in 2023 and 4.8 million in 2024. It is estimated that the sales volume from 2022 to 2024 will be 220 / 350 / 4.8 million respectively.
② prediction of average selling price and weight: in the first half of 2022, the supply of pigs tends to increase while the consumption is weak, and the pig price remains at the bottom. In the second half of the year, China’s pig supply should decrease month on month, and the pig price may rise near the cost line. It is estimated that the average price of pigs in 2022 will be 14-15 yuan / kg. In 2023, with the continuous deregulation of production capacity from 2021 to 2022, the supply of pigs will tighten, and the pig price may usher in an upward cycle. The average price of pigs in the whole year is expected to be 19-20 yuan / kg. It is estimated that the average selling price of commercial pigs of the company from 2022 to 2024 will be 14.50/19.50/17.00 yuan / kg respectively, and the slaughter weight of live pigs will be 118 / 115 / 115 kg respectively.
③ marketing cost forecast: the average full cost of the company in 2021 will be about 18.5 yuan / kg. In 2022, the full cost will be continuously reduced by improving capacity utilization, adjusting sow structure, eliminating three yuan, improving efficiency, improving fine management, reducing feed waste, strengthening informatization and forming daily, weekly and monthly analysis. It is estimated that the full cost from 2022 to 2024 will be 16.1/15.3/14.9 yuan / kg respectively.
To sum up, considering the company’s focus on developing and expanding pig breeding business, plus slaughtering, refrigeration, fresh meat sales and other businesses, it is estimated that the company will achieve operating revenue of 5.379 billion yuan, 9.662 billion yuan and 11.496 billion yuan respectively from 2022 to 2024, with a year-on-year increase of 168.57%, 79.62% and 18.98% respectively, and the gross profit rate is – 4.72%, 23.46% and 16.07% respectively.
(2) investment suggestions:
The company is the first listed pig breeding enterprise in China. At present, it has developed into a whole industry chain business model focusing on pig industry, covering feed, raw material trade, breeding pigs, commercial pigs, slaughtering, cold chain, logistics, etc. In the cold winter of breeding, we may see more and more enterprises go bankrupt due to the rupture of cash flow. The company relies on Hunan SASAC and has natural guarantee in financial support. The background of state-owned enterprises provides a good margin of safety for investors, and the predictable asset injection provides the possibility for the company’s pig breeding business to expand beyond expectations. It is estimated that the net profit attributable to the parent company from 2022 to 2024 will be -593 million yuan, 1.378 billion yuan and 852 million yuan respectively, with a year-on-year increase of – 111.52%, 332.45% and – 38.17% respectively; EPS is -0.74, 1.71 and 1.06 yuan / share respectively, and the corresponding PE is -12.81, 5.51 and 8.91x respectively. Considering the continuous strengthening of the pig cycle reversal and the expectation of the company’s asset injection, we are optimistic about the company’s long-term growth and maintain the “buy” rating.
Risk tips
(1) animal disease risk;
(2) risk of large fluctuation of pig price;
(3) price fluctuation risk of feed raw materials;
(4) food safety risks.
