The first loss of listing! Muyuan shares a pig upside down 60 yuan, 78 billion debts to pay off?

In 2023, Muyuan shares are expected to have a net loss of 3.8 billion yuan to 4.6 billion yuan.

Author | Yu Qi

Source | Bond Market Watch

During the downturn of the pig cycle, Muyuan Co., Ltd. (002714.SZ), which can still achieve revenue of 100 billion yuan and net profit of 10 billion, will have a rare loss in 2023.

Recently, Muyuan Co., Ltd. disclosed its annual performance forecast, and the company expects a net loss of 3.8 billion yuan to 4.6 billion yuan in 2023. This is also the first time that the company's annual net profit has been in the red since its listing.

Muyuan explained that the main reason for the loss was the sharp year-on-year decline in the price of live pigs, and the average sales price of live pigs in 2023 decreased by about 20% compared with 2022. At the same time, the Company intends to make an impairment provision for some consumable biological assets after conducting impairment tests on consumable biological assets in accordance with the requirements of accounting standards.

Investors for the "first loss" of Muyuan shares reaction flat, since the release of the performance forecast, Muyuan shares share price fluctuations little, as of February 5 closing, reported 35.7 yuan / share, compared with the performance forecast before the release of 0.22%.

Some investors even said, "Everyone is losing money, and it's okay." ”

Source: Stock Bar

01

The loss per pig was 59.55 yuan to 72.08 yuan

Judging from the data previously disclosed by the company, in 2023, Muyuan will sell a total of 63.816 million live pigs. According to last year's net loss of 3.8 billion yuan to 4.6 billion yuan, the average loss per pig of Muyuan shares is about 59.55 yuan to 72.08 yuan.

Looking at the industry as a whole, this level of loss is indeed not high.

According to the pig industry data previously released by the Ministry of Agriculture and Rural Affairs, from January to December 2023, the highest monthly average loss of net profit per head of free-range pigs reached 420 yuan/head, and the highest average loss of net profit per head of large-scale breeding pigs also reached 243 yuan/head. Assuming that the monthly slaughter volume is the same, the average loss of free-range pigs in 2023 is roughly estimated to be about 239 yuan, and the average loss of large-scale breeding heads will also reach about 92 yuan.

And among the peers who have disclosed the performance forecast, only *ST Zhengbang (002157.SZ) and New Hope (000876.SZ) have achieved profitability, of which Zhengbang Technology is mainly due to the completion of the company's reorganization plan, and New Hope is the introduction of strategic investment in white feather meat and poultry and food deep processing business to affect the increase in net profit attributable to the parent company.

However, during the downward trend of the pig cycle, the loss of the entire industry is not new, but the previous performance of Muyuan shares was too outstanding, and it was also cited as a spectacle. For example, in 2022, the company's revenue against the trend will exceed 100 billion yuan, and its net profit will be as high as 14.933 billion yuan.

Source: Wind

Therefore, compared with itself, Muyuan's performance in 2023 has made some investors wonder: Will the industry boss not be able to hold on?

02

There are still 30 billion bank borrowings left

In fact, the pressure on Muyuan shares is not only the loss of performance, but also the debt problem behind it has become a sword of Damocles hanging over the company's head.

Since 2019, major pig companies, including Muyuan Co., Ltd., have begun to spend huge sums of money to expand production capacity. Due to the radical expansion of production, the financial pressure of Muyuan shares is also increasing year by year. In 2020 and 2021, its investment cash outflow will be as high as 45.353 billion yuan and 35.968 billion yuan respectively, far exceeding the net profit of 27.451 billion yuan and 6.904 billion yuan in the same period. To this end, Muyuan shares borrowed heavily and the asset-liability ratio soared from 40.04% to 61.3% in two years. The gearing ratio for the third quarter of 2023 was 59.65%.

On January 10 this year, Muyuan announced that as of December 31, 2023, the company's annual cumulative new borrowings accounted for 21.24% of its net assets at the end of 2022.

Muyuan's net assets at the end of 2022 were 88.07 billion yuan, that is, the company borrowed 18.703 billion yuan last year. The loan balance of Muyuan shares at the end of 2022 has reached 59.295 billion yuan, and the company's loan balance as of December 31, 2023 is 77.998 billion yuan.

The new borrowings of Muyuan Co., Ltd. came from banks for 16.413 billion yuan, accounting for 87.76% of the new borrowings.

Shen Meng, director of Xiangsong Capital, believes that the current low pork prices have a serious impact on the daily operation of pig enterprises, especially large enterprises that have expanded their production capacity against the market, and the pressure is more prominent. In order to maintain cash liquidity, it is difficult to obtain funds through the capital market, so it has to increase borrowing.

Source: Canned Gallery

In the company's debt structure, according to Muyuan, short-term borrowings account for a relatively high proportion, and 60% of the interest-bearing debt structure is short-term borrowings. This is due to the fact that the pig houses and biological assets of breeding enterprises account for a relatively large proportion and are not easy to be used as collateral, so short-term credit loans account for a relatively large proportion of the overall liabilities, which is a specific phenomenon of the industry.

The term of short-term loans is generally less than 1 year, and the specific term needs to be subject to the contract signed by the borrower. In other words, the debt repayment pressure of Muyuan shares is still relatively urgent.

However, Muyuan said that since this year, the company has communicated with cooperative banks to optimize some debt structures.

In addition, the company will do a good job in cash flow management according to the external environment and production and operation conditions, continue to reduce costs and increase efficiency, and improve profitability. At the same time, on the basis of sound operation, we will gradually reduce the level of leverage and continue to optimize the financial structure. At present, the overall credit line exceeds 95 billion yuan, the unused credit line exceeds 30 billion yuan, and the cost of new bank loans last year is basically below 4%.

03

Can 2024 pass through the "pig cycle"?

Although the current pressure on Muyuan's debt and performance is relatively large, many investors still have good expectations for it.

Source: Stock Bar

As the "first brother of pig breeding", Muyuan shares have been through the high-volatility pig cycle with the advantage of low cost. Bai Wenxi, vice chairman of the China Enterprise Capital Alliance, said that the whole industrial chain model of self-breeding and self-raising of Muyuan Co., Ltd. not only effectively controls production costs, but also solves food safety problems. Wen's shares, New Hope and Zhengbang Technology's "company + farmer" substitution model, the cost of market-oriented procurement of piglets accounts for about 40% of the selling price of slaughtered commercial pigs, which greatly raises the breeding cost of commercial pigs, making Muyuan's self-breeding and self-raising heavy asset model still show its cost advantage when the industry price has fallen sharply below the cost line, which is the main reason why Muyuan shares maintain profitability and smoothly pass the pig cycle.

Even in 2023, when the performance is in the red, Muyuan shares are still actively reducing costs. It is reported that the company's annual average complete cost of pig breeding is about 15 yuan/kg, which is significantly lower than 15.7 yuan/kg in 2022, and the actual cost is about 0.9 yuan/kg after excluding the increase in raw material prices.

Source: Canned Gallery

In 2024, the National Development and Reform Commission released data showing that as of the week of January 31, the price of live pigs rose 6.43% month-on-month to 15.56 yuan/kg, rising for two consecutive weeks, the price of pig feed fell 0.94% month-on-month to 3.17 yuan/kg, a new low since January 2021, the price of pig feed increased 7.44% month-on-month to 4.91, a new high since December 2022, and the balance point of pig feed price fell 0.22% month-on-month reported at 4.45, and the expected profit of pig breeding rose 314.26% month-on-month to 160.4 yuan/head, a new high since December 2022.

Qin Jun, secretary of the board of directors of the company, told investors that from the marginal changes in supply and demand, although the average level of sows that can reproduce in various channels is at a high level, it is in a downward trend as a whole, "We can see that the basic supply in 2024 is a low position compared with 2023." On the demand side, demand in 2024 will be a little better than in 2023 as the economy gradually stabilizes in 2024. A little more optimistic about the overall price performance in 2024."

Under the pressure of debt, and the first loss since listing, can the "first brother of pig raising" Muyuan shares regain their strength in the new year?