The source of this article: Times Finance Author: Wang Xin
As pork prices continue to decline, the days of A-share pork concept stocks are not very good.
On the evening of October 27, Wen's shares (300498.SZ) released the first three quarters of 2021 performance report. The report shows that the company's revenue in the first three quarters was 46.569 billion yuan (RMB, the same below), a year-on-year decrease of 16.00%, a loss of 9.701 billion yuan, a year-on-year decline of 217.71%, mainly due to the operating losses of the pig industry. In the third quarter, the company's revenue was 15.939 billion yuan, down 18.20% year-on-year, and a loss of 7.204 billion yuan, down 276.21% year-on-year.
Image source: Figureworm Creative
The performance is not satisfactory, but Wen's shares still receive the attention of many institutional investors. As early as October 15, after the release of the third quarter performance forecast, 173 well-known institutional investors at home and abroad, including Gao Yi Asset, Wells Fargo Fund, Dacheng Fund, Western Profit Fund, E Fund, Tianhong Fund, participated in the telephone analysis meeting held by Wen's shares.
Judging from the survey content, Wen's shares, as the industry leader, still maintain their own pace of progress.
Wen's shares said that in the past year or so, the company has been paying close attention to the work of preventing non-proliferation, doing a good job in restoring pig breeding capacity, improving the technical level and breeding efficiency, and has gradually come out of the trough in production, achieving a reversal in production, and the current listing volume, breeding pig situation and some core production indicators are close to the pre-plague level. Next year, when the company gradually recovers 18-20 million heads, the assets and personnel efficiency can be better played, and the company now has sufficient confidence to resume production.
<h5>Listed pig companies have lost money across the board, but there is little downside</h5>
Since the beginning of the pig cycle triggered by African swine fever in 2018, pig prices have been in a continuous upward stage, and reached the highest point of the cycle of 40.98 yuan / kg in November 2019. However, the increase in the supply of live pigs has also caused the price of live pigs to fall. Since last year, pig prices have entered a downward cycle.
While pig prices are falling, the prices of raw materials such as upstream feed are rising. Entering the second half of 2021, feed companies have raised prices, including Jingzhou Oriental Hope, Xiangyang New Hope, Hainan Tongwei, Hainan Hejie, Sichuan Pujiate and other more than ten feed companies announced that the price of pigs, chickens, ducks, aquatic products and other prices rose by 50-150 yuan / ton.
This also brings a lot of pressure to downstream pig companies.
For the reasons for the sharp loss of this performance, Wen's shares admitted that due to the sharp decline in domestic pig prices, the pig industry fell into a comprehensive loss in the third quarter, coupled with the continuous rise in the price of feed raw materials, the company's pigs out of the pen including purchased seedlings and fattening pigs, the disposal of low-efficiency breeding pigs and other factors pushed up the cost of pig raising.
In addition to Wen's shares, a number of listed pig companies in the third quarter of this year also suffered heavy losses.
Makihara shares in the first three quarters of the year to achieve operating income increased by 43.71% year-on-year to 56.282 billion yuan, but the net profit attributable to the mother fell by 58.53% year-on-year to 8.704 billion yuan, in the third quarter, the company achieved revenue fell 18.68% year-on-year To 14.744 billion yuan, the net profit attributable to the mother was a loss of 822 million yuan; New Hope expects a loss of 2.58 billion yuan to 2.98 billion yuan in the third quarter of this year, with a loss of 5.995 billion yuan to 6.395 billion yuan in the first three quarters; Tianbang shares expect a loss of 2.05 billion yuan to 2.25 billion yuan in the third quarter of this year, and a loss of 2.7 billion yuan to 2.9 billion yuan in the first three quarters of this year.
However, at present, the pig breeding industry is in a deep loss, the speed of enterprises to capacity is accelerating, and the downward space for pig prices is not large.
On October 18, Fu Linghui, spokesman for the National Bureau of Statistics, said that the pig inventory and discharge basically returned to the level of normal years. He pointed out that since the beginning of this year, pig production has continued to recover, production capacity has continued to expand, and related prices have declined. In the next stage, as the demand for meat curing continues to increase in some regions, coupled with the boosting effect of new year's day and Spring Festival festival consumption, the demand for pork consumption will increase. At the same time, the second round of frozen pork storage in the central government will soon start during the year, which is conducive to the stability of pork prices.
"From the perspective of future development, the current large-scale breeding of pig production is constantly improving. These large-scale enterprises have a high ability to grasp the changes in the market and prevent and respond to the risk of market fluctuations. At the same time, in the field of pig production, the mechanism of state regulation and control is constantly improving, which is conducive to the stability of pig production. Fu Linghui said.
Huaxi Securities also mentioned in the research report that the inflection point of production capacity has appeared, and the fourth quarter of this year is the best time window for the layout on the left. Tianfeng Securities pointed out that in the medium and long term, the industry can breed sows began to gradually dematerialize, the current pig cycle bottom has been relatively clear, the low valuation of pig stocks can provide a margin of safety, and the investment value is gradually emerging.
For the future price trend of pork, Wen's attitude is also more optimistic, and its vice president and secretary of the board of directors Mei Jinfang said in a recent interview with the media that after the sharp rise in pig prices, it will go through a process of adjustment. "Pig prices have seen lows in June and October this year, but there has also been a rebound in the follow-up, whether judging from time or price, it is now the bottom of the U-shaped cycle, and there will be a significant recovery next year."
On October 25, Wen's shares also said in response to investors' questions that the company suspended the purchase of pig seedlings in May this year, and the seedlings after May were mainly self-produced pig seedlings. If the normal rhythm of pig breeding is followed, it is expected that the fattening part of the purchased pig seedlings can be completed in October and November, and the cost of raising pigs will gradually return to normal. "After the company gets rid of the historical burden, the cost of raising pigs will drop significantly."
Wen's shares predict that under the dual control of self-propagating pig seedling costs and breeding costs, the complete cost of breeding each pig next year will be controlled at 7.8 yuan / jin, combined with the market recovery, it is expected to turn losses into profits.
<h5>Reduce costs and increase efficiency, and practice internal skills</h5>
The overall trend of the pig plate is not good, and pig companies have also begun to "see the tricks".
In terms of aquaculture management, the current epidemic prevention and control capabilities and effects of Wen's shares have been greatly improved. For example, in the way of preventing Africa, Wen's shares have comprehensively promoted the Yunnan epidemic prevention model, and the overall epidemic prevention level has been significantly improved.
Wen's shares said that at present, the company's first priority is to ensure the stability of large-scale production in winter, which is the fundamental foundation and core of the company's entire production and operation in the next step of high-quality development. Now the whole company has actively taken action to strictly implement the work of preventing non-compliance in winter to ensure that production can be prevented and controlled. At the same time, we will make full use of the existing production capacity, do a good job in the quality optimization of breeding pigs, take the initiative to eliminate inefficient sows, replace them with binary hybrid or three-line hybrid sows with high production performance, do the basic work of breeding pigs, and continue to reduce the average value of breeding pigs.
At the same time, Wen's shares also began to adjust the organizational structure and improve management efficiency.
On the evening of October 27, after the disclosure of the third quarterly report, Wen's shares also issued an "Announcement on Adjusting the Company's Organizational Structure", which said that in order to promote the development of the company's breeding pig business, the company established Guangdong SMIC Breeding Industry Technology Co., Ltd., and the management functions of the breeding pig division of the original management organization were undertaken by SMIC Breeding Industry and the breeding pig division was abolished. The management functions of the former management organization, Dahuanong Division, were changed to Zhaoqing Dahuanong Biopharmaceutical Co., Ltd., and the Dahuanong Division was abolished.
In addition, Wen's shares have also begun to consolidate their foundations and be prepared to fight a protracted war.
Wen's shares said that since the second half of last year, the company has controlled capital expenditures, activated assets, timely disposed of some idle assets to collect funds, and basically stopped newly started projects at this stage. At the same time, the company actively expands financing channels, making full use of conventional financing tools such as bank loans, medium notes, short-term financing, and supply chain financial financing tools such as gold bills, underwriting passes, and bank acceptance drafts.
According to Tianyancha data, in April this year, Wen's shares successfully issued convertible bonds, raising a total of 9.297 billion yuan. According to Wen's shares, the company's current book inventory funds are abundant, and as of the end of September, the inventory funds exceeded 12 billion yuan. In addition, the company has billions of financial investment projects that can be realized at any time.
Wen's shares said that according to the capital stress test, the company has sufficient confidence and confidence to successfully pass through the bottom of the current round of pig cycle, and it also revealed that the amount of the company's third quarter performance forecast is about 1.4 billion to 1.7 billion yuan, mainly including the price reduction provision and equity incentive fees for inventory pigs.
"Although the performance of the third quarter report is poor, the company is full of confidence and motivation. The company has gradually come out of the trough in production, achieved a reversal in production, and the current listing volume, breeding pig situation and some core production indicators are close to the pre-plague level. Wen's shares said.
Recently, msci, an international authoritative index company, upgraded Wen's ESG rating to BB, which is the first animal husbandry enterprise in China to receive this rating.
<h5>Walk on multiple legs to create a whole industry chain</h5>
Unlike the pork business, which is in the adjustment period, other businesses such as Wen's poultry have performed well this year, and their performance and competitiveness have been further improved.
"In the first three quarters, the situation of the poultry industry has generally improved, the sales price of live poultry has increased year-on-year, and the company's poultry industry is still profitable." Wen's shares previously said in the announcement that in the first three quarters, the company sold 788 million broiler chickens (including wool chicken, fresh products and cooked food), meat ducks (including wool ducks and fresh products) 43.0699 million, and the prices of wool chickens and wool ducks increased by 14.63% and 19.87% respectively year-on-year.
Wen's shares said that the first three quarters of the poultry industry situation has generally improved, live poultry sales prices have risen compared with the same period last year, although the feed raw materials continued to increase prices, but the company's poultry production performance for many consecutive months reached the best level in history, in addition to feed other controllable breeding costs continued to decline, poultry industry as a whole is still profitable. "The company will continue to actively promote the transformation and upgrading of the poultry business, further promote the work of tapping potential and reducing consumption and increasing efficiency, continue to reduce costs, and improve product competitiveness and profitability."
According to the above survey, the complete cost of broiler breeding in the third quarter of this year is about 6.6 yuan / kg, excluding the increase in feed raw materials of 0.7 yuan / kg, the overall decrease of 0.4 yuan / kg compared with the same period last year, the cost control is ideal. Overall profit, this year's poultry business in the first quarter has a good profit, the second quarter slight loss, the third quarter in July, August by the price downturn affected, the loss is larger, September to restore profitability, the first three quarters of the poultry business as a whole still has a good profit. At the same time, the capacity of the entire poultry industry has accelerated this year, and it is expected that the poultry business will have better returns next year.
It is worth noting that Wen's shares have also laid out other supporting and related industries, and hedged with the company's main business of chicken and pig, and the overall operating situation is relatively good.
Since 2018, Wen's shares have begun to lay out the pig slaughtering business as a strategic development direction to extend the upstream and downstream of the industrial chain. In the future, Wen's will be in accordance with the "82" ratio of layout slaughtering business, "Five-Year" period plans to complete the design capacity of 12.5 million heads / year, the existing pig slaughtering capacity of 1.5 million heads, the follow-up will steadily promote the slaughtering capacity investment, it is expected that this year and next two years to complete the new production capacity of about 4 million heads, to the "Fifth Five-Year" end of the slaughtering and processing capacity of 14 million heads / year. Wen's shares have also set up a professional team to lay out distribution centers in central cities in China to open up the upstream and downstream of the industrial chain and expand sales channels.
In addition, Wen's animal protection business is also at a stable and profitable level, with a profit of about 300 million yuan year-to-date, an investment sector of about 800-900 million yuan year-to-date, and the performance of agricultural and animal husbandry equipment companies and dairy companies is also quite excellent, and it is in a stable growth stage.