\u3000\u3 China Vanke Co.Ltd(000002) 311 Guangdong Haid Group Co.Limited(002311) )
Key investment points:
The company’s performance in 2021 is in line with the express report, and its profitability is under pressure in the short term. The annual revenue of the company was 854.2 billion yuan, with a year-on-year increase of 5.61%; The net profit attributable to the parent company was 1.596 billion yuan, a year-on-year decrease of 36.73%; The net profit attributable to the parent company after deducting non-profit was 1.519 billion yuan, a year-on-year decrease of 38.22%; Excluding the pig breeding sector, the company achieved an operating revenue of 81.357 billion yuan, a year-on-year increase of 43.71%, and a net profit attributable to the mother of 2.492 billion yuan, a year-on-year increase of 32.97%. In the first quarter of 2022, the profitability of the company was further under pressure. In 2022q1, the company achieved a revenue of 19.953 billion yuan, a year-on-year increase of 26.98%; The net profit attributable to the parent company was 201 million yuan, a year-on-year decrease of 71.62%. The decline of the company’s profitability is mainly squeezed by the rise of feed product raw material prices and the decline of pig prices. In particular, pig breeding continues to be in a deep loss cycle, which is a great drag on the company’s performance. Excluding pig breeding business, 2022q1 company achieved an operating revenue of 18.579 billion yuan, a year-on-year increase of 29.77%; The net profit attributable to the parent company was 503 million yuan, a year-on-year increase of 3.52%.
The industry ushered in the rise of both volume and price, and the breeding cost further increased. Since 2021, pig production capacity has recovered rapidly, downstream demand has expanded, and feed has ushered in a situation of simultaneous rise in volume and price. In March 2022, under the catalysis of geopolitical events, the global Shenzhen Agricultural Products Group Co.Ltd(000061) price continued to rise sharply, resulting in the feed price rising several times continuously from the high base in 2021. According to the data of feed industry association, in 2021q1, China’s total feed output was 67.2 million tons, with a year-on-year increase of 3.1%, which was at a high level since 2018; In terms of price, the price of corn was at a high level in the first quarter, and the price of soybean meal rose sharply, which promoted the increase of the cost of compound feed and concentrated feed by about 172 yuan / ton and 243 yuan / ton respectively, and the feed cost per kilogram of pork, chicken and egg increased by 0.6 yuan, 0.5 yuan and 0.3 yuan respectively. Driven by the rising price of raw grain, China’s feed price has reached a record high, and the breeding cost has further increased. In the short term, the pig stock is still relatively high, and the demand for feed is relatively rigid. The feed output is expected to maintain a steady growth trend in the first half of 2022, which plays a supporting role in the high operation of feed prices. In the long run, the pig price is at the bottom of the cycle, the pig production capacity is still in the stage of gradual de industrialization, and the feed price may have a high callback with the pig production capacity.
The company adheres to the development strategy of “one body and two wings”, and the market share continues to increase. In 2021, the company will continue to adhere to the development mode of “one body and two wings” with feed as the core to drive the growth of seedling and animal protection business. As the core business of the company’s long-term development, feed achieved a sales revenue of 69.826 billion yuan in 2021, accounting for 81.19%, an increase of 43.19% over the same period of last year. In 2021, the company sold 19.63 million tons of feed products, a year-on-year increase of 33.90%, and its market share in China increased from 5.80% in 2020 to 6.69%. From the perspective of subdivided products, the company’s poultry feed, pig feed and aquatic feed achieved sales of 9.44 million tons, 4.6 million tons and 4.67 million tons respectively. Among them, the growth rate of pig feed and aquatic feed was significantly ahead of the overall level of the industry, and poultry feed ushered in an adverse growth (+ 11%) when the overall output of the industry decreased by 3.1%. Driven by feed products, the company’s seedling and animal protection business continued to grow, the breeding service system was further improved, and its core competitiveness was enhanced. In 2021, the company’s seedling and animal protection products achieved revenue of 855 million yuan and 892 million yuan respectively, with a year-on-year increase of 42.30% and 34.27% respectively.
The profitability of the company was dragged down by the pig breeding business. In 2021, the gross profit margin of the company’s overall sales was 8.49%, a year-on-year decrease of 3.17 percentage points; The net profit margin on sales was 2.11%, down 2.61 percentage points year-on-year. In 2021, the pig price remained at the bottom of the cycle, and the company’s pig breeding sector lost 896 million yuan. Dragged down by the pig breeding sector, the company’s profitability decreased significantly compared with that in 2020. In terms of segments, the gross profit margin of the company’s feed business was 9.08%, down 1.24 percentage points year-on-year due to the rise in the price of raw materials; The gross profit margin of seedling business was 51.22%, a year-on-year decrease of 1.78 percentage points; The gross profit margin of animal insurance business was 50.85%, with a year-on-year increase of 0.27 percentage points. Driven by the development mode of “one body and two wings”, the company’s seedling and animal insurance business has ushered in rapid growth, and the profitability is relatively high, which is expected to become a new growth point of the company’s performance.
The company started the fixed increase project, and the actual controllers subscribed in full, demonstrating their confidence in long-term development. On April 19, 2022, the company issued a fixed increase plan, which plans to raise no more than 1.5 billion yuan to supplement the company’s working capital. The fixed increase will be fully subscribed by Xue Hua, the actual controller of the company. With the operation and development of the company and the continuous expansion of business scale, the interest bearing debt of the company has gradually increased in recent years. As of the first quarter of 2022, the company’s asset liability ratio was 60.98%, an increase of 12.65 percentage points over the end of 2019. This fixed increase will help reduce the company’s asset liability ratio, optimize the capital structure, improve the company’s anti risk ability, help the company further expand production capacity and improve the company’s core competitiveness in the industry. At present, Mr. Xue Hua, the actual controller of the company, indirectly holds the shares of the company through haihao investment. After the issuance of this fixed increase, Mr. Xue Hua will directly hold no more than 33266799 shares of the company, with a shareholding ratio of 1.96%. The full cash subscription of the actual controller of the company is conducive to enhancing investor confidence, improving the investment value of the company, so as to maximize the interests of the company’s shareholders and effectively protect the interests of minority shareholders.
Maintain the company’s “overweight” rating. Considering the industry cycle fluctuations and the company’s capacity expansion, with the continuous improvement of the company’s market share, it is estimated that the company will achieve revenue of 107725/126584/145635 billion yuan from 2022 to 2024, and the net profit attributable to the parent company will be 23.24/40.94/5.396 billion yuan respectively, corresponding to EPS of 1.40/2.46/3.25 yuan per share. According to the situation of comparable listed companies in the feed industry, the company is given a valuation of 29x P / E ratio in 2022. Considering the leading advantages of the company, the improvement of industry concentration in the future and the fluctuation of pig cycle, the company is given a certain valuation premium to maintain the “overweight” rating of the company.
Risk tip: the price of raw materials fluctuates, the price of pigs fluctuates sharply and the promotion of seedling business is not as expected.
