Event: the company recently released its 2021 report and 22-year quarterly report. In 2021, the revenue was 15.744 billion yuan, an increase of 31.35%, the net profit of return to the mother was-685 million yuan, a decrease of 139.87%, and the net profit of non-return was-655 million yuan, with a decrease of 137.93%. In the first quarter of 2022, revenue reached 3.391 billion yuan, an increase of 1.58%, net profit of-69.6 million yuan, a decrease of 123.12%, and a net profit of-70.07 million yuan, a decrease of 122.9%. The comments are as follows:
The volume of pig-raising business has increased and decreased, and the trend is getting better. In 2021, the company produced 1.6033 million pigs, an increase of 19.2%. The farming and food business lost 1.237 billion yuan, of which the pig business lost about 1.1 billion yuan (excluding the impact of asset impairment provisions, the net loss was about 820 million yuan), and the net loss of other farming businesses was about 120 million yuan. The loss of pig business is mainly due to the fact that the Feed Division has carried out the business of purchasing fattening piglets when the price of piglets is high, which leads to an increase in the comprehensive average cost of raising piglets; secondly, it is related to the low capacity utilization rate of Henan, Gansu and other bases which are still in the period of completion and production. Since the second half of 2021, the company has gradually shrunk the scale of raising pigs in the feed division, and has stopped the business of purchasing piglets and fattening pigs from the feed department in 2022. Henan and Gansu bases entered the full production period in the second quarter of 2022, we believe that with the elimination of adverse effects, the company's pig breeding costs will tend to decline. In the first quarter of 2022, the company produced 376900 pigs, an increase of 6.5 percent, and is expected to produce 2.2 million pigs for the whole year.
Feed and animal protection continued to grow. In the feed business, feed sales in 2021 were 2.3125 million tons, an increase of 21.08%, and an income of 5.135 billion yuan, an increase of 21.83%, and a net profit of 249 million yuan. In the vaccine business, the income in 2021 was 980 million yuan, an increase of 15.8%, and a net profit of 252 million yuan. The total net profit of the two businesses is 501 million yuan. In the first quarter of 22, the income of the feed and vaccine business still maintained rapid growth, and the growth trend is expected to continue in the second quarter and the second half of the year. These two businesses are stable cash cattle business, which can provide good financial support for the expansion of breeding business.
The company's whole industry chain model has obvious advantages at the bottom of the anti-cycle, market share or steady increase, maintain the buy rating. The company's strategy focuses on animal protein products, and we are optimistic that its whole industry chain operation model has the advantage of smooth performance fluctuations at the bottom of the cycle and a more stable cash flow relative to its peers. We expect pig prices to enter the upward cycle in the second half of 2022, and the company's breeding business will fully benefit from this and will show good performance flexibility and maintain a "buy" rating.
It is estimated that the company will produce 220 million pigs in 22x23, with a net profit of 303 million yuan, corresponding to 40X/7.46X PE.
Risk hint: the price trend of live pigs is not as expected, and the progress of the project is not as expected.
