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Previously, we tracked the pig breeding industry chain, and this track is a continuation of the previous report, focusing on tracking the "integrated composite breeding" track.
Due to the large number of players in the industry, we have divided into multiple combined reports to track them. Friends who are interested in the previously covered "Makihara VS Wenshi VS Zhengbang VS New Hope" report can be found in the YoushuKu Industry Chain Report Library.
As of February 21, 2022, the price of pork in the mainland fell to a low of 19.69 yuan / kg, the loss of the pig industry increased, at the same time, the number of fertile sows continued to decline, as of the end of January 2022, the national stock of fertile sows reached 42.9 million heads, down 0.9% month-on-month.
Today, through the perspective of integrated composite pig breeding enterprises, let's take a look at their respective performances under the pig cycle:
Judging from the recent growth of participants in the industrial chain:
Figure: Financial data
Source: Tajian Research
From Wind's consistent expected growth and prosperity: the three companies will maintain high growth rates in 2022-2023.
Chart: Wind's consensus outlook for growth and prosperity
Source: WIND
All aspects of the integrated pig breeding industry chain include:
Figure: Industrial chain
Upstream - seed production and research and development (Longping Hi-Tech, Dabeinong, Tsuen Yin Hi-Tech, etc.); feed processing (New Hope, Dabeinong, Haida Group, etc.); Animal Protection (Zhongmu Shares, Biological Shares, Preco, etc.)
Midstream - pig breeding (Makihara shares, Wen's shares, COFCO Jiakang, etc.); pig slaughtering (Shuanghui Development, Yurun Food, COFCO Jiakang, etc.)
Downstream - Meat Processing (Shuanghui Development, Yurun Food, COFCO Jiakang)
Then, here's the question:
1. What are the differences between the layout of the three companies in the whole pig industry chain?
2. What is the key to all aspects of the pig industry chain? What kind of business layout can be more competitive in the medium and long term?
This report will be updated to the industrial chain map
(I)
Let's take a look at the revenue structure of these two companies:
I. COFCO Jiakang——
In 2020, the revenue is mainly composed of four major parts: pig breeding (28.87%), meat imports (48.18%), fresh pork (19.3%) and meat products (3.65%). thereinto:
Pig breeding business - mainly pig breeding, including supporting pig feed business, the compound growth rate of 79% in the past three years;
Meat imports - mainly including pork, beef, poultry and mutton, etc., distributed in China, belong to the commercial and trade business, the compound growth rate of 99% in the past three years;
Fresh pork - including pig slaughter, cold meat sales, etc., the compound growth rate of 13.97% in the past three years;
Meat products - mainly Western-style low-temperature products (bacon, sausages, ham, etc.), the scale of income is small, 690 million yuan in 2020, the compound growth rate of 36.56% in the past three years.
Chart: REVENUE STRUCTURE OF COFCO JIAKANG (100 million yuan)
Second, Tiankang Biological——
The company's business is extensive, covering grain collection and storage, feed, pig breeding, animal vaccines, veterinary drugs, slaughter, meat products and other businesses, accounting for 60.55% of the revenue in Xinjiang in 2020. thereinto:
The slaughtering, meat products and veterinary drugs business has been relatively stable in the past three years;
Feed and pig breeding three major business growth rate is relatively fast, reaching 28% and 102% respectively;
The grain collection and storage business comes from several Grain Subsidiaries in Xinjiang acquired in 2019, and it is worth mentioning that although the business belongs to the commercial business, the gross profit margin is as high as 20%.
Chart: Income structure of Tiankang Biology (100 million yuan)
THIRD, the Great Northern Farmers——
As a comprehensive agricultural company, the company's business in 2020 is divided into two parts: seed industry (2.5%) and pig breeding and feed (97.5%). thereinto:
Seed industry – including the development and production of hybrid rice, maize, pesticides, fertilizers and genetically modified seeds.
Pig farming – including breeding pig breeding, pig fattening, pig feed, animal vaccines and pharmaceuticals ,etc. (but not pig slaughtering and meat products business);
Historically, most of the company's business income is relatively stable (including feed, seed industry, animal protection, plant protection), and the revenue growth mainly comes from pig breeding, with a three-year compound growth rate of 69%.
Chart: Income structure of Great Northern Farmers (100 million yuan)
The three companies have cross-cutting businesses in midstream pig farming, and in 2020, COFCO Jiakang (5.46 billion) > Dabeinong (3.801 billion) > Tiankang Bio (3.477 billion).
In addition, upstream feed revenue, Dabeinong (16.587 billion) > Tiankang Bio (4.215 billion), downstream fresh and meat products, COFCO Jiakang (3.65 billion) > Tiankang Bio (1.115 billion).
(2)
Next, we will put together the recent quarterly revenue and profit growth to perceive the growth trend:
First, revenue growth
Chart: Quarterly Revenue Growth (%)
The income growth rate of Tiankang Biology and COFCO Jiakang is mainly affected by the price of pigs, and the income of Dabei Farmers is mainly affected by the price of pig feed.
This is mainly due to the difference in the proportion of revenue, in 2020, the pig business accounted for the total revenue of Tiankang Bio (29.07%) ≈ COFCO Jiakang (28.87%) > Dabeinong (16.67%), pig feed business Dabeinong (72.7%) > Tiankang Bio (35.2%) > COFCO Jiakang (0%).
Pig feed, usually lags behind the price of pork for about a year (pork prices rise → after July can breed sow inventory increase→ 5 months later pig inventory increased → feed prices increase).
Therefore, having both pig breeding and feed business can calm cycle fluctuations to a certain extent, for example, during the sharp decline in pork prices in 2021Q2, COFCO Jiakang achieved -18.22% negative growth, while Tiankang Bio, which has a feed business, still achieved positive growth of 68.2% (due to feed prices remaining high).
Chart: Pork vs Feed Prices
Second, profit growth
The profit growth rate of the three companies is more consistent with the price of pork, because the profit level of other businesses, such as slaughter, fresh, feed and seed industries, is relatively stable, and the marginal fluctuation of profit depends largely on changes in pork prices.
Chart: Growth rate of attributable net profit (%)
(III)
Break it down into quarters and look at:
First, COFCO Jiakang - in the first half of 2021, the revenue was 7.503 billion yuan, -18% year-on-year, and the profit was -426 million yuan, an increase of -121% year-on-year.
1) Analysis of growth rate from a single quarter
In 2021H1, the operating income was 7.503 billion yuan, -18% year-on-year, -23% month-on-month, and the net profit was -426 million yuan, -121% year-on-year, and -122% month-on-month.
In the context of the sharp decline in pig prices in the first half of 2021, the company's output increased by 109% year-on-year, achieving volume-for-price exchange, and revenue grew slightly negatively, but also led to large losses.
Chart: COFCO Jiakang Quarterly Revenue (Left) Quarterly Profit (Right)
2) Go back a few quarters of growth:
The company has a solid history of operation, and 2021H1 is a half-year with only losses.
However, the company's profitability is highly dependent on pork, for example, the profit during the low boom period 2019H1 is only 142 million yuan, but in the high boom 2020 half-year profit can exceed 2 billion yuan.
Second, Tiankang Biology - in the first three quarters of 2021, the revenue was 12.329 billion yuan, an increase of +43% year-on-year, and the profit was -193 million yuan, a year-on-year increase of -113%.
2021Q3 achieved operating income of 4.412 billion yuan, +13% year-on-year, -4% month-on-month, and net profit -434 million yuan, year-on-year -295%, and -623% month-on-month.
The positive year-on-year growth in single-quarter revenue was due to the steady growth of pig feed and grain collection and storage business, but the loss was magnified, which was due to the increase in output by 40.4% year-on-year during the period when pig prices remained low.
Chart: Tiankang Bio's quarterly revenue (left) quarterly profit (right)
2) Go back to the growth of previous quarters
The company's revenue has grown steadily over the years, benefiting from the steady growth of grain storage, feed and pig breeding.
The profit level is synchronized with the pig cycle, and the profit in 2020Q4 is less than expected, which is due to the management expenses incurred by the management of the quarter according to the prosperity of the bonus for themselves.
Third, Dabeinong - in the first three quarters of 2021, the revenue was 23.442 billion yuan, an increase of +54% year-on-year, and the profit was 107 million yuan, a year-on-year -93%.
3) Analysis of growth rate from a single quarter
2021Q3 achieved operating income of 8.173 billion yuan, +30% year-on-year, +4% month-on-month, and net profit of -391 million yuan, year-on-year -166%, and -462% month-on-month.
The steady growth achieved in a single quarter was due to the boom in pig feed prices; the profit was a sharp loss, which was due to the greater drag on the pig business on the company, and the company's pig output increased by 180% year-on-year.
Chart: Dabeinong Quarterly Revenue (Left) Quarterly Profit (Right)
4) Go back to the growth of previous quarters
The company's revenue has grown steadily over the years, thanks to the increase in feed production, which increased by 22.9% year-on-year in 2020.
However, the revenue growth is not effectively reflected in the profit, during the high pork boom in 2020, the company's peak profit in a single quarter is only 600 million yuan, which is mainly subject to the increase in breeding costs.
(Wanton)
After comparing the growth, let's look at the changes in profit margins and expense ratios.
First, the cost structure
Chart: Cost of main business (not disclosed by COFCO)
Source: Company Annual Report
From the perspective of cost composition, the proportion of labor costs of Tiankang Biology is higher than that of Dabeinong, mainly because the pig breeding of Tiankang Biology is all self-propagating and self-supporting, and Dabeinong has a large proportion of farmers' cooperation model, and the cost is reflected in other generations of nursing fees.
Second, the gross profit margin
Chart: Gross profit margin (%) (adjusted to COFCO as a corporate accounting standard)
The gross profit margins of the three companies as a whole follow the fluctuations in pork prices.
From the perspective of the central level of gross profit margin, Tiankang Bio (23.62%) > COFCO Jiakang (19.8%) > Dabeinong (18.49%), COFCO is limited by the lower gross profit margin of the import business, and Dabeinong is limited by the lower gross profit margin of the feed business.
From the perspective of gross profit margin volatility, COFCO Jiakang > Tiankang Biological > Dabeinong, the higher the proportion of other businesses such as feed, the smaller the sense of gross profit margin fluctuation.
It is worth noting that although pork prices experienced a sharp decline in 2021, it is still equivalent to the level of the first half of 2019, but the gross profit margin level of Tiankang Bio and Dabeinong in 2021 is much lower than that in the first half of 2019, which means that the blind expansion of pig farming has led to an increase in unit costs.
3. Net interest rate
Chart: Net Profit Margin (%)
The direction of net profit margin fluctuations is more consistent with gross profit margin.
At the level of net profit margin, COFCO Jiakang > Tiankang Biological > Dabeinong, and COFCO Jiakang achieved a higher net profit margin level on the basis of lower gross profit margin, which mainly stemmed from its excellent period cost control ability.
4. Expense rate for the period
Chart: Period Rate (%)
In terms of management rates, Tiankang Bio is not much different from Dabeinong, but it is higher than COFCO Jiakang, mainly due to more miscellaneous expenses.
In terms of sales expenses, Tiankang Bio is not much different from Dabeinong, and COFCO Jiakang is lower, because it has the sales channels of COFCO Group.
In terms of R&D expenditure, Dabeinong is higher than Tiankang Bio (COFCO's lower R&D is not separately disclosed), mainly due to Dabeinong's R&D investment in the seed industry, including genetically modified seeds, pesticides, etc.
In terms of financial rates, the three companies do not differ much.
5. Return on net assets
Chart: Return on equity
Historically, COFCO Jiakang > Tiankang Bio > Dabeinong, mainly from the difference in net interest rate.
(Wu)
The supply and demand balance calculation and price cycle of the pig breeding industry have been discussed in detail in the previous pig industry chain report (see the Youshu industrial chain report library for details), because the supply and demand balance table is in annual terms, we will not update it for the time being.
Here, we will do some updates to the prosperity data of the pig industry, and look at them one by one:
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