\u3000\u3 China Vanke Co.Ltd(000002) 714 Muyuan Foods Co.Ltd(002714) )
Three decades of precipitation has created a leader in pig breeding industry. The development of the company can be traced back to 1992. Now it has formed an industry leader with pig breeding as the core and covering the whole industrial chain of feed processing, breeding pig breeding, commercial pig breeding and slaughtering and processing. With the expansion of production capacity since the listing of the company and the continuous improvement of pig sales, the pig sales increased by 122.3% to 40.263 million in 2021. The revenue scale of the company has achieved high growth through the pig cycle. The operating revenue increased by 40.2% to 78.890 billion yuan in 2021, and the CAGR reached 52.8% from 2011 to 2021. Under the background of low pig price, the net profit attributable to the parent company decreased by 74.9% to 6.904 billion yuan in 2021.
Pig breeding industry: the capacity reduction is still continuing, and grasp the opportunity of leading layout at the turning point of the industry boom. On the supply side, it is expected that from May 2022, the slaughter volume of pigs will definitely enter the range of month on month decline. On the demand side, there is a high probability of improvement in the second half of the year with the recovery of catering consumption and the advent of the peak consumption season. The pig price may show an upward trend in shock. It is expected that the central level in the second half of the year is higher than that in the first half of the year. The capital situation is worrying due to the large capital expenditure of the industry in the early stage and the deep loss since 2021. At the same time, the high feed cost since 2022q1 has pushed up the breeding cost line, and the deregulation of production capacity is still continuing, which is expected to support the high degree of cycle reversal. To sum up, at this stage, we believe that high-quality leaders with good capital status and excellent cost control ability are expected to cross the bottom of the cycle and fully enjoy the upward dividend of the next cycle.
Self breeding and self-supporting, strict control and low-cost construction of core advantages. The company adopts the integrated breeding mode of self breeding and self breeding, and all links are strictly controlled to form a cost advantage. Specifically: 1) leading breeding technology, breeding pigs for their own use, reducing the cost of breeding pigs, and building a recurrent binary breeding system, so that the company can achieve rapid recovery of production capacity under the influence of non plague and support the increase of market share of the company; 2) At the feed end, the company carries out the supply chain layout around the grain producing areas, flexibly adjusts the formula based on the changes of raw material market, and establishes a dynamic nutrition model for pigs of different varieties, different types and different growth stages; 3) Continuous technical investment, continuous iterative upgrading of pig house design, equipped with intelligent environmental control and intelligent feeding to improve management efficiency; 4) The production process is highly efficient, the employee training and assessment system is perfect, and the employee incentive is sufficient. It has three employee stock ownership plans and two restricted stock incentives to bind core talents.
Low cost + high profit boost the high growth of production capacity, layout the slaughtering business and extend the industrial chain. The company’s excellent cost control ability has laid a capital foundation for capacity expansion. By the end of 2021, the company has built a breeding capacity of more than 70 million, has a land reserve with a capacity of nearly 100 million, and has 2.83 million fertile sows and 1 million reserve sows. Since 2019, the company has arranged pig slaughtering business to extend the industrial chain. In 2021, the company slaughtered 2.899 million pigs, realizing an income of 5.42 billion yuan. By 2022q1, the slaughtering capacity of the company has reached 22 million, with more than 5000 enterprise customers such as agricultural batch dealers and chain supermarkets. The follow-up breeding + slaughtering business is expected to develop in a coordinated manner and enhance the value of products.
Investment advice. The company is the leader of pig breeding in China. Under the integrated breeding mode of self breeding and self breeding, the company has built a complete industrial chain including feed processing, pig breeding, breeding pig expansion, commercial pig breeding and slaughtering meat, strictly controlled all links, built a low-cost core advantage, and achieved high growth through the breeding cycle based on the cost advantage. Based on our prediction of the pig cycle, we expect the company to realize a net profit attributable to the parent of RMB 936 / 23764 / 13.871 billion from 2022 to 2024, an increase of – 86.4% / 2439.9% / – 41.6% at the same time. According to 6.5 times of Pb in 2022, the target market value of the company is 419.8 billion yuan, and the corresponding target price is 78.88 yuan. The company is given a “buy” rating for the first time.
Risk warning: sudden epidemic disease or natural disaster insurance; The reversal of pig price is less than expected; Risk of rising raw grain prices; Covid-19 epidemic situation is repeated.
