This week’s view:
Planting industry chain: on December 24, 2021, the 32nd meeting of the Standing Committee of the 13th National People’s Congress unanimously adopted the decision on Amending the seed law of the people’s Republic of China (Draft), which will come into force on March 1, 2022. This is another important amendment after the seed law was revised at the 17th meeting of the Standing Committee of the 12th National People’s Congress on November 4, 2015. The core points include: 1) establishing the system of substantial derived varieties (EDV), and obtaining the consent of the owner of the new plant variety right of the original variety when making commercial use of substantive derived varieties; 2) Increase the protection of plant variety rights, expand the protection links of variety rights from the original three to eight, and add five links of “processing for reproduction, offering for sale, import, export and storage”; 3) We strengthened the intensity of tort compensation and raised the upper limit of compensation from three times to five times. If it is difficult to determine the amount, we will raise the limit of compensation from three million yuan to five million yuan. We believe that the seed industry, as the chip of agriculture, is an important basis for ensuring China’s food security. Under the background of covid-19 pneumonia, the state pays more attention to the seed industry, and the seed industry business environment is expected to be further optimized. In addition, the seed industry policy will be released in the Spring Festival, including the No. 1 central document and the action plan for seed industry revitalization. In terms of target selection, we mainly recommend Beijing Dabeinong Technology Group Co.Ltd(002385) , Yuan Longping High-Tech Agriculture Co.Ltd(000998) with obvious first mover advantage and Shandong Denghai Seeds Co.Ltd(002041) with excellent performance of hybrid maize varieties.
The perennial root of sugarcane is three years in China, but five to seven years in Brazil and Australia. This is the reason why the overall supply of sugar was relatively sufficient in the past and the price of sugar did not rise for many years, but the cycle will only be late and will not be absent. 2021 has been five years away from the high point of the previous cycle. Superimposed on the higher than expected rise in oil prices and the massive release of global currencies, as well as the frequent occurrence of global extreme climate caused by the sunspot movement this year, a new upward cycle of sugar has begun and is expected to last until the second half of next year. In terms of target selection, the steady target focuses on recommending China’s sugar industry leader Cofco Sugar Holding Co.Ltd(600737) , and the elastic target Nanning Sugar Industry Co.Ltd(000911) is expected to benefit fully.
In addition, we continue to recommend chemical stocks Meihua Holdings Group Co.Ltd(600873) with a valuation of only 10 times. We expect that next year’s performance elasticity comes from the cost improvement brought by the new lysine production capacity put into operation at the end of the year and the downward price of corn. In the long run, the monosodium glutamate and amino acid industries are limited by the new capacity under the background of carbon neutralization, and the valuation center is expected to rise.
Pig breeding: according to the data of zhuyitong, the average price of pigs nationwide this week was 13.90 yuan / kg, with a decrease of 0.80% on a weekly basis. According to the data of the National Bureau of statistics, by the end of 2021, there were 449.22 million pigs in China, with a year-on-year increase of 10.5%, including 43.29 million fertile sows, with a year-on-year increase of 4.0%, reaching 101.7% and 96.8% respectively at the end of 2017. The elimination rate of fertile sows was 2.92% month on month compared with the end of the third quarter. At present, the main contradiction of industry investment lies in the extent and speed of capacity removal of fertile sows. In early October 2021, pig prices rebounded more than expected, which narrowed the extent of capacity removal, but the trend of capacity removal still exists. Referring to historical experience, the traditional pork consumption is off-season after the Spring Festival, while the pork supply side is still relatively loose before the second quarter, the probability of pig price remains volatile and downward trend, the industry is still in a state of loss, and the process of capacity removal may be accelerated. We believe that the most pessimistic time of the current industry expectation has passed, the downward trend of pig price will continue to reduce the stock of breeding sows, and the inflection point of pig cycle will accelerate. From the current time node, the average market value of some high-quality pig breeding stocks has fallen to a historically low level, and the configuration window has been gradually opened. For the selection of specific targets, it is recommended in turn: Wens Foodstuff Group Co.Ltd(300498) , Shenzhen Kingkey Smart Agriculture Times Co.Ltd(000048) . In addition, Jiangxi Zhengbang Technology Co.Ltd(002157) , Tech-Bank Food Co.Ltd(002124) , New Hope Liuhe Co.Ltd(000876) , Tecon Biology Co.Ltd(002100) , Jiangsu Lihua Animal Husbandry Co.Ltd(300761) , Tangrenshen Group Co.Ltd(002567) , Hunan New Wellful Co.Ltd(600975) , Fujian Aonong Biological Technology Group Incorporation Limited(603363) , Shenzhen Kingsino Technology Co.Ltd(002548) are expected to benefit fully.
Risk tips
The recovery process of pig production capacity is less than expected, the product sales is less than expected, and the commercialization process of GM is less than expected.
