Events:
Aonong Biology released the 2021 annual report and the first quarterly report of 2022: in 2021, the company realized operating income of 18.04 billion yuan, an increase of 56.6% over the same period last year, and a net profit of-1.52 billion yuan, turning from profit to loss over the same period last year; 2022Q1 achieved operating income of 4.16 billion yuan, an increase of 6.7% over the same period last year, and realized a net profit of-350 million yuan, turning from profit to loss.
Main points of investment:
In 2021, the company's pig business developed rapidly, not all reached production and the decline in pig prices affected profits.
In 2021, the company's sales revenue from pig farming reached 3.73 billion yuan, an increase of 19.0% over the same period last year.
There were 3.246 million live pigs, an increase of 141.1% over the same period last year, of which 1.892 million piglets were sold, accounting for about 58.3%, and 1.318 million fattening pigs were sold, accounting for about 40.6%. In 2021, pig prices fell sharply compared with the same period last year, feed raw material prices rose, the company's pig business is in the process of rapid development, breeding capacity is not all up to production, fixed cost sharing is much, resulting in high short-term costs and substantial losses in the breeding sector. The gross profit of the company's breeding business was-13.1%, a decrease of 60.8 pct over the same period last year, and a gross profit of-490 million yuan. In 2021, the company recognized the impairment loss of assets of 460 million yuan, of which the impairment loss of productive biological assets was 10 million yuan, which was the loss of eliminating inefficient sows, and the price loss of inventory was 430 million yuan. At the end of March 2022, the company kept 1.892 million live pigs, an increase of 47.9% over the end of March 2021 and 5.6% over the end of December 2021. The company can reproduce and reserve about 320000 sows, and it is estimated that there will be 400000 sows by the end of 2022. In terms of the number of pigs, the company plans to produce 600,800,100 pigs from 2022 to 2024, of which the matching rate of self-fattening capacity is 50%, 75% and 10 million respectively.
In terms of cost, the company weaned piglets showed a downward trend as a whole, and the cost of weaned piglets decreased to less than 450 yuan per piglet in March 2022. With the increase of capacity utilization, the future weaning piglet cost target is 350 yuan per piglet. The fattening work of the company has just begun to enter the matching stage of self-fattening, and the fattening cost will be reduced to 16 yuan / kg in the future.
The increase of pig feed and aquatic feed is obvious, and the gross profit margin is basically flat. In 2021, the company's feed business achieved an income of 10.13 billion yuan, an increase of 55.5% over the same period last year. Feed sales were 2.841 million tons, an increase of 36.5 percent over the same period last year, including pig feed sales of 1.687 million tons, an increase of 66.4 percent, accounting for 59.4 percent; poultry sales of 734000 tons, down 9.7 percent, accounting for 25.8 percent; and aquatic products and other feed sales of 420000 tons, an increase of 64.7 percent and 14.8 percent, an increase of 2.2 pct. The average unit price of feed was 3566 yuan / ton, an increase of 13.9% over the same period last year. The gross profit margin of the feed business is 6.1%, which is basically the same as the same period last year.
2022Q1 produced 1.047 million pigs, an increase of 95.8% over the same period last year. 2022Q1 achieved operating income of 4.16 billion yuan, an increase of 6.7% over the same period last year, and realized a net profit of-350 million yuan, which changed from profit to loss compared with the same period last year, mainly because pig prices remained low in the first quarter. The gross profit margin of the company in the first quarter was-1.9%, the impairment loss of assets was not recognized, and the net operating cash flow was 130 million yuan.
Multiple channels to expand the sources of funds, convertible bonds will increase to support business expansion. In 2021, the company successfully issued convertible bonds, raising a net fund of 980 million yuan; in September 2021, the company obtained the approval of the CSRC for a private additional issue, and the fixed additional fund of 1.43 billion yuan was put in place in April 2022. By the end of the first quarter, the company's monetary capital was 540 million yuan, and the book value of inventory was 2.94 billion yuan, an increase of 69.9 percent over the end of 2020; the book value of fixed assets and projects under construction totaled 7.03 billion yuan, an increase of 29.2 percent over the end of 2020; and productive biological assets were 1.09 billion yuan, a decrease of 10.7 percent over the end of 2020. In terms of liabilities, the company's short-term loans at the end of the quarter and non-current liabilities due within one year totaled 5.06 billion yuan, while long-term loans and bonds payable totaled 3.03 billion yuan.
Profit forecast and investment rating: the inflection point of the pig cycle has arrived, the pig price will show an upward trend in the second half of the year, the layout of the sow production capacity of the company will be completed, and the number of live pigs will continue to increase significantly, and with the improvement of the utilization rate of sow capacity, the breeding cost will continue to decline; the company's feed business is positive, and steady growth protects the pig business. It is estimated that the company's homing net profit from 2022 to 2024 will be-2.771 billion yuan, respectively, and the corresponding PE will be-/ 4.2 plus 5.5 times, maintaining the "overweight" rating.
Risk hints: the risk of non-plague and other diseases; the risk that the number of live pigs is less than expected; the risk of long-term sharp rise in feed raw material costs; the risk of fluctuations in pig prices; and the risk that the company's performance is lower than expected.