The cost of the company's pig business is expected to improve, the ability of vaccine research and development is strengthened, and the growth rate of new products is expected. Taking into account the impact of pig price and cost fluctuations, we downgrade the company in 2022-2023 and the new company in 2024 with a forecast of 0.03 EPS of 1.18 and 0.78 yuan (the original forecast of 23rd of 2022) of 0.19 and 1.72 in 2022). Combined with the comparable company valuation, we value the company 10 times in 2023, corresponding to the target price of 11.8 yuan, and maintain the "buy" rating.
Matters: the company issues the annual report of 2021 and the quarterly report of 2022. In 2021, the company achieved revenue of 15.744 billion yuan, + 31.35% compared with the same period last year, and the net profit returned to the mother was-686 million yuan,-139.87% compared with the same period last year. 22Q1 achieved revenue of 3.392 billion yuan, + 1.58% year-on-year, and net profit of-70 million yuan,-123.12% year-on-year. Our comments on this are as follows:
The cost is high in 2021, and the farming business is a drag on performance. Due to the rising price of feed raw materials and the relatively high proportion of purchased piglets in feed plate in 2021 (we estimate that the proportion of purchased piglets in feed plate in 2021 is 25% +), and the low utilization rate of new production energy in Henan and Gansu (we estimate that the utilization rate of Gansu's annual capacity is less than 30%), the comprehensive cost of the company's pig farming sector is high in 2021. In 2021, the company produced 1.6033 million live pigs, + 19.20% year on year, and the average price of commercial pigs was 15.84 yuan / kg, down 46.65% from the same period last year. We expect the pig sector to lose nearly 1.1 billion yuan (including 200-300 million asset impairment losses) for the whole year.
The culture of 22Q1 is low and the vaccine is stable. 2022Q1 Company has produced a total of 376900 live pigs, + 6% year-on-year, of which: the average price of fat pigs is 11.59 yuan / kg, and the estimated complete cost of pigs is 18-18.5 yuan / kg, which continues to decline from the previous quarter. The estimated loss of breeding business in the first quarter is 1.7-180 million (including 100 million + impairment reversal). In terms of vaccine business, the downstream farming of 2022Q1 was in the doldrums, but the company's revenue / profits increased both, and profits increased by 7%. Among them, the vaccine collection of foot-and-mouth disease, small ruminant vaccine and brucellosis vaccine all maintained growth, and the income of brucellosis vaccine nearly doubled. In addition, affected by the high price of raw materials and downstream farming, the company's feed profit decreased compared with the same period last year.
The construction of pig production capacity has been steadily advanced, and the competitiveness of the vaccine business has been consolidated. The company has abundant monetary funds and steadily promotes production capacity construction. 22Q1 currency funds are 1.359 billion yuan, projects under construction are + 8% month-on-month, and productive biological assets are up 15% month-on-month, moving towards the 500w goal of pig production. With the improvement of capacity utilization, feed formula optimization, feeding level, etc., it is estimated that the company's cost will gradually decline. In the field of vaccines, with the gradual improvement of livestock and poultry prices, the demand for vaccines in the market has increased steadily. 22Q1, the company's P3 laboratory has obtained CNAS certification, and it is expected that it will be the next city in the field of major epidemic vaccine research and development to consolidate the competitiveness of the vaccine sector.
Risk factors: large-scale outbreak of animal diseases; food safety problems; natural disasters; policies are not up to expectations; pig prices are not up to expectations.
Investment suggestion: the cost of the company's pig business is expected to be improved, the ability of vaccine research and development is strengthened, and the growth rate of new products is expected. Considering the influence of pig price and cost fluctuation, we downgrade the company from 2022 to 2023, and the EPS of the new company in 2024 is 0.03 shock 1.18 shock 0.78 yuan (the original forecast is 0.19 shock 1.72 yuan in 2022 shock 23). Select Muyuan / Wen's / New Hope and other three pig farming companies as comparable companies, the comparable company's 2023 valuation is respectively 9.12 / 8.9512.4 times PE, the average valuation is 10 times PE, combined with the comparable company's average valuation in 2023, considering that the company's breeding costs are expected to improve and the vaccine sector is highly competitive, we give the company a 10-fold valuation in 2023, corresponding to the target price of 11.8 yuan, maintaining the "buy" rating.