In 2023, the life of A-share "pig farmers" will be difficult - pig prices will be sluggish, the cycle will continue to grind to the bottom, and the cumulative loss amount and loss duration of the whole industry will be the highest in history.
Affected by factors such as the slow recovery of terminal consumption and the oversupply of production capacity, pork prices were unstable throughout the year, only about two months above 16 yuan/kg, and the whole industry suffered deep losses. In the first three quarters, the total loss of net profit attributable to the parent company of the pig sector was 16.728 billion yuan, and Muyuan shares (002714.SZ), Wen's shares (300498. SZ), New Hope (000876. SZ) 3 leading companies have a net loss of more than 10 billion.
In the continuous operating losses, the capital chain of listed pig enterprises has become increasingly tight, with the average asset-liability ratio reaching 62.28%, the highest in history, while the current ratio and quick ratio have fallen below the historical low.
Survive the bottom of the cycle and survive is the last word. In 2023, listed pig enterprises will generally reduce capital expenditure, and the core work will focus on reducing costs and reasonably controlling cash flow.
At the moment of production capacity reduction, the fundamentals and prosperity of the pig breeding industry have not reversed the signal, and the valuation of listed pig enterprises is at a historical low. The mainstream view in the market is that the capacity reduction at the bottom of this cycle will be completed in the first half of 2024, and then enter an upward period. The stock price performance of listed pig companies often precedes the fundamentals, and will the opportunity to invest on the left side of the pig cycle appear in the first half of next year?
The longest cycle loss bottom in history
2023 is the third loss year for the pig breeding industry, pig prices continue to fluctuate at a low level, during which production capacity continues to slow down, the elasticity and momentum of spot rises are insufficient, and futures prices are unilaterally declining.
Looking back at the performance of pig prices (outside the three yuan pigs) throughout the year, after the Spring Festival quickly fell below 15 yuan/kg, after a slight rebound and then lowered, the entire second quarter did not exceed 15 yuan/kg, and in early July it fell below 14 yuan/kg; Since the fourth quarter, pig prices have fluctuated downward, hitting the lowest price of 13.71 yuan/kg in the year on December 9. As of December 21, the national pig price was reported at 14.87 yuan/kg, down 15.08% year-on-year and 1.72% month-on-month.
According to the latest monitoring data of the National Development and Reform Commission, the national pig feed price ratio in the second week of December was 4.30, and the average loss of pig breeding heads in the future was 37.18 yuan according to the current price and cost.
From the perspective of supply and demand, the abundant supply of production capacity and oversupply are the main reasons for the sluggish pig prices this year, and the slaughter volume of listed pig enterprises increased year-on-year. According to the sales briefing, 18 listed pig companies slaughtered 137.31 million heads in January ~ November 2023, a year-on-year increase of 16.5%, and 18 listed pig companies slaughtered 13.79 million heads in November, a year-on-year increase of 15.7% and a month-on-month increase of 8.6%. Muyuan shares, Wen's shares, New Hope slaughter volume stable in the top three, in November slaughtered 5.295 million heads, 2.574 million heads, 1.676 million heads, 1~11 months of cumulative slaughter were 57.184 million heads, 23.2954 million heads, 16.2088 million heads.
An agricultural analyst told the first financial reporter that pork prices have a negative relationship with pork production capacity. "The impact of the epidemic on consumption and breeding in the past three years, coupled with changes in the industry pattern, has made the trend of this cycle more complex and difficult to predict, and the traditional cycle law has not worked. The above-mentioned analysts said, "On the one hand, the level of pork consumption is slowly recovering, and the total demand is okay, but the market confidence is slightly insufficient, and the consumption undertaking is slightly weak." On the other hand, the increase in the number of pigs slaughtered and the improvement of breeding efficiency have made the supply more abundant, and the two-headed squeeze has led to a sluggish performance of pig prices. ”
The production capacity of fertile sows determines the supply of pigs, and the progress of destocking is regarded as an important indicator to judge the trend of the cycle. As of the end of October 2023, the national breeding sow herd was 42.1 million heads, 102.68% of the normal number of 41 million sows, down 0.7% month-on-month, 3.9% year-on-year, and down 4.1% from 4.39 million heads at the end of December 2022. Although the industry has been losing money for a long time during the year, the overall rate of destocking sows has been slow.
The aforementioned analysts further said that the further decline in pig prices in the fourth quarter is conducive to the acceleration of the industry's production capacity, and it is expected that domestic macro consumption will change little in 2024, and pork demand will still follow the seasonal pattern. "According to the estimation of the production capacity of fertile sows, the production capacity of fertile sows in the first quarter of 2024 is higher than that in the first quarter of this year, the pressure on pork supply is greater, and the first quarter is the off-season for seasonal demand. The performance of listed companies in the current quarter may appear at the bottom of the fourth loss in this cycle, and the loss range may be higher than that of the same period this year. ”
Listed companies are in trouble, and debt ratios are rising
The pig price of listed pig enterprises in this cycle has expanded significantly, and when the cycle is down, the larger the production capacity, the heavier the loss, resulting in further tightening of cash flow, deterioration of debt repayment indicators, and higher debt ratios. The controlling shareholders of some listed pig enterprises are even seeking equity transfers.
Wind data shows that as of the end of the third quarter of this year, the average asset-liability ratio of the pig sector was 62.28%, 59.77% and 54.87% in 2022 and the same period in 2021, respectively, and the debt ratio has continued to rise in the past two years, with 13 listed pig companies having an asset-liability ratio of more than 60%. Only Muyuan shares, Wen's shares, Tiankang Biology (002100. SZ) decreased month-on-month, while others increased, and New Hope, Tianbang Food (002124. SZ), Jin Xinnong (002548. SZ) and other companies have an asset-liability ratio of more than 70%, and the asset-liability ratio of individual pig enterprises has exceeded 85%.
It should be pointed out that in the first three quarters of this year, the current ratio and speed ratio of the short-term debt repayment indicators of listed pig enterprises continued to decline. According to the data, as of the end of the third quarter, the average current ratio and quick ratio of 14 pig enterprises with pig breeding as their core business fell to 0.94 and 0.45 respectively.
For the financial situation, Muyuan shares, Wen's shares and other leading enterprises mentioned several times in this year's institutional research that the company's main work goals are to reduce production costs, manage cash flow, optimize debt structure, and reduce the level of asset-liability ratio. According to the institutional survey of Muyuan Co., Ltd. on December 20, 2023, in January ~ November 2023, the company's pig breeding complete cost of less than 14 yuan/kg accounted for about 20% of the field line slaughter, and the cost of more than 16 yuan/kg accounted for about 15%, and the dispersion of the complete cost of pig breeding gradually decreased.
During the long downward period, listed pig enterprises are generally in trouble. *ST Zhengbang (002157.SZ) due to the wrong cycle rhythm caused by the rupture of the capital chain bankruptcy, the company completed the bankruptcy reorganization within this year, the twin group is the main investor of the reorganization of *ST Zhengbang, and the industrial investor, after the completion of the reorganization, the controlling shareholder and actual controller of *ST Zhengbang will be changed.
This year, New Hope has taken frequent actions to reduce its debt ratio. This month, the company announced that it intends to introduce war investment for the white feather meat and poultry industry chain and food deep processing business, and if the transaction is completed, the asset-liability ratio is expected to drop by 4% ~ 5%. On November 30, New Hope just disclosed a fixed increase plan, planning to raise 7.3 billion yuan, of which 2.204 billion yuan will be used to repay bank debts. This is the largest private placement of the amount launched by New Hope since its listing 25 years ago.
The plight of listed pig enterprises is also reflected in the reduction of the number of slaughters throughout the year. Compared with the actual slaughter volume of listed pig enterprises and the target slaughter set at the beginning of the year, the actual slaughter volume of most enterprises declined, and in the case of uncertain length at the bottom of the cycle, listed companies chose to "sell less and lose less", which shows that the cash pressure has been transmitted to production capacity.
There are also listed pig companies that are busy with capital operation, and they seem to be betting on the upward trend of the cycle. Recently, Dabeinong (002385. SZ) announced that the company signed a "strategic cooperation agreement of intent" with Aonong Biotech (603363.SH) to acquire control of Aonong Biotech through acquisition. As of the end of the third quarter, the company's monetary funds were 300 million yuan, with total liabilities of nearly 18 billion yuan, of which short-term borrowings and non-current liabilities due within one year totaled about 5.75 billion yuan, and the asset-liability ratio was as high as 89.41%.
Under the negative fundamentals, the net inflow of institutional funds has dropped sharply, and the stock price of individual stocks has continued to hit a new low. As of December 21, the average decline in the pig sector was 10.73% and the median was 14.92%. New Hope led the decline, and after the release of the fixed increase plan, its share price fell as low as 8.83 yuan, a new low in 57 months. As of the close of trading on the 21st, New Hope closed at 9.03 yuan, with a total market value of 41 billion yuan.
The essence of the pig cycle comes from the role of the profit cycle in promoting the behavior of industry groups, and the core contradiction of the longest loss period of this round is that with the intensification of losses, the production capacity has not been accelerated. In the first quarter of 2024, the loss of the whole industry is expected to be higher than that of the same period this year, whether it can promote the acceleration of production capacity, the formation of a marginal shift in supply, and the opportunity to go to the side of the investment layout, which will be the biggest highlight of the pig cycle in 2024.