Items:
Company announcement: 2022H1's parent net profit is expected to lose 5500-65 million yuan, down 123.73% and 128.04% over the same period last year; deducting non-net profit is expected to lose 6700-77 million yuan, down 128.98% and 133.31% over the same period last year.
Guoxin agricultural viewpoint: 1) Donghui is the largest supplier of live pigs to Hong Kong in China, realizing the optimal allocation of live pig products in Hong Kong and Guangdong market. 2022H1 performance is slightly lower than expected, which may be mainly due to the impact of floods in the south. 2) We believe that the loss caused by force majeure factors such as short-term natural weather disasters does not change the company's core competitive advantage. on the one hand, the company's live pig supply market in Hong Kong has the attribute of high quality and high price according to auction pricing, which is beneficial to enterprises with high quality, and the company's live pig market still has twice the growth space. On the other hand, the company's cost advantage is significant compared with its peers, with the complete cost of 2022Q1 reaching 17.8 yuan / kg. And it is expected to continue to decline in the second half of 2022. In addition, the company's current farming land reserve of 2 million, accelerated expansion at the bottom of the cycle, is expected to maintain high-speed growth in the future, or fully benefit from the volume and price rise brought about by the boom in pig prices. 3) risk hints: the death of uncontrollable pig epidemic in the industry, the cost pressure caused by the uncontrollable rise in the price of grain and raw materials, and the possible impact of natural weather disasters such as floods on the normal construction and operation of pig farms. 4) Investment suggestions: from the company's point of view, Dongrui shares are scarce pig breeding targets for Hong Kong, and there is still much room for improvement in the market share of Hong Kong. At present, the company's breeding land reserve has reached 2 million, and the expansion is accelerated at the bottom of the cycle. It is expected that the column will reach 55-60, 120 and 1.8 million respectively from 2022 to 2024. From an industry point of view, 2022 is the best stage for the layout of the pig plate. Recently, pig prices have risen to more than 22 yuan / kg, and the industry is booming. From this point of view, Dongrui shares may fully benefit from the volume and price rise brought about by the improvement in pig prices. It is estimated that the company's 22-24-year net profit will be 2.59 EPS 8.35 / 680 million yuan, corresponding to 1.22 max 3.92 max 3.19 yuan, and the previous share price PE 26.3 max 23.8max 7.5 X, maintaining a "buy" rating.
Comments:
The company's 2022Q2 performance was slightly lower than expected, mainly because the Southern Flood impact Company issued a mid-report performance forecast for 2022 on July 14. The net profit of 2022H1 company is expected to lose 5500-65 million yuan, down 123.73% and 128.04% over the same period last year; deducting non-net profit is expected to lose 6700-77 million yuan, down 128.98% 133.31% over the same period last year. The decline in performance growth is mainly due to a sharp decline in pig prices in the first half of 2022 compared with the same period last year. The company's 2022H1 sold a total of 242800 live pigs, an increase of 36.50% over the same period last year. The average selling price of 2022H1 commercial pigs was 19.00 yuan / kg, down 47.15% from 35.95 yuan / kg in the same period last year. From the perspective of 2022Q2 performance, the company's 2022Q2 net profit loss is expected to be 2300-33 million yuan, of which the impairment may be 7 million yuan. Overall, the company's 2022Q2 performance is slightly lower than expected, possibly because the farm was affected by the southern flood in June. According to the investor relations activity record table on June 30, 2022, the joint venture company has a farm in Qingyuan City, Guangdong Province, and the flood disaster is more serious. It is expected to cause greater losses.
As a pioneer in pig farming in Hong Kong, Dingzeng is expected to help the company to increase steadily. The company has a complete pig industry chain that integrates feed production, breeding and reproduction, commercial pig breeding, live pig supply to Hong Kong and pig sales in Guangdong market. It is the largest supplier of live pigs to Hong Kong in China. The company realized 199700 live pigs in Hong Kong in 2021, and the Hong Kong business accounted for about 54% of the company's overall pig sales in 2021. At the same time, the company is located in Heyuan, Guangdong Province, and is the production base of Guangdong-Hong Kong-Macau Greater Bay Area's "vegetable basket". It has realized the optimal allocation of live pig products in the Hong Kong market and Guangdong market, with price advantage and market advantage. At present, the company and its wholly-owned subsidiaries have received a total quota of 179900 live pigs to Hong Kong in 2022. When the quota is more than 80% in the future, they can apply for the quota again. The business of supplying live pigs to Hong Kong has certain market advantages. on the one hand, the price of pigs in Hong Kong is higher under normal circumstances and is priced through auctions, so the selling price of live pigs with good quality will be higher, which is good for enterprises with high quality of breeding. On the other hand, there is still room for improvement in the share of Longtou market in the live pig market for Hong Kong, and the company's future goal is to achieve annual supply of more than 500000 pigs to Hong Kong, and there is still room for more than double growth.
In addition, in terms of overall listing, according to the record of investor relations activities on June 30, 2022, the number of sows that the company can breed is about 35000 and the number of reserve sows is about 8000. In addition, according to the investor relations activity record sheet on June 23, 2022, the company's target is 55-600000 in 2022, 1.2 million in 2023 and 1.8 million in 2024. In the land reserve, the company has stored 2 million production capacity breeding project land in Heyuan City, and it is expected that the company will continue to maintain high growth rate in the future. In addition, the company will adjust its 2022 non-public offering plan on July 7, 2022, adjusting the amount of capital raised from no more than 773 million yuan to no more than 1.033 billion yuan. After the fixed increase and landing in the future, the company's capital reserves are expected to be further abundant. The driving force may also be more sufficient.
The forerunner of building culture, full cost leader in the industry
Adhering to the concept of "eco-healthy breeding" and "intelligent breeding", the company actively develops and implements a new breeding model: first, it creates a high-bed fermented pig breeding system in the industry, through the design of a two-tier pig house, the upper layer is used for pig breeding and the lower layer is used for organic fertilizer production. Compared with the traditional breeding mode, it can reduce the discharge of waste gas and waste water, and be beneficial to the protection and development of the ecological environment. In addition, the new farms of the company adopt the intelligent ecological pig raising mode of multi-storey buildings, which are equipped with mechanized and intelligent equipment such as automatic temperature control system, reclaimed water reuse system, deodorization treatment system, automatic feeding system, mechanical dung scraping system, etc., with 6 floors to achieve the target of 200000 annual production volume, and the total area is more than 100mu, which greatly improves the land utilization rate and management efficiency and meets the needs of rapid expansion.
In terms of cost, according to the company's announcement, the total cost of completion in the first quarter is 17.8 yuan / kg, which is in the leading level in the industry. It is expected that the complete cost of commercial pig breeding will continue to decline in 2022. The core of the company's cost reduction in the future will be reflected in the following aspects: first, in terms of pig breeding improvement, the company will formulate a three-year breeding improvement plan. The R & D team will continue to select high-yield and high-quality pig breeds that can meet the quality needs of Hong Kong, so as to reduce the cost-sharing of piglets. Second, in feed, the company will optimize the feed formula, improve the conversion rate of plant protein feed components, and reduce feed costs; third, in the whole process management, strengthen the fine management of pig breeding, export sales, selection and other links to reduce the death rate. Fourth, in terms of the scale of aquaculture, we should speed up the construction of the aquaculture base and achieve production as soon as possible, and the utilization rate of a lot of new capacity is still very low, resulting in high phased costs. In the future, with the increase in scale, fixed costs will be further diluted to improve economies of scale.
Investment suggestion: scarce pig breeding targets for Hong Kong, maintain "buy"
From the company's point of view, Dong Rui shares are scarce pig breeding targets for Hong Kong, and there is still much room for improvement in the market share of Hong Kong. At present, the company's breeding land reserve has reached 2 million, and the expansion has accelerated at the bottom of the cycle. It is expected that the column will reach 55-60, 120 and 1.8 million respectively from 2022 to 2024. From an industry point of view, 2022 is the best stage for the layout of the pig plate. Recently, pig prices have risen to more than 22 yuan / kg, and the industry is booming. From this point of view, Dongrui shares may fully benefit from the volume and price rise brought about by the improvement in pig prices. It is estimated that the company's 22-24-year net profit will be 2.59 EPS 8.35 / 680 million yuan, corresponding to 1.22 max 3.92 max 3.19 yuan, and the previous share price PE 26.3 max 23.8max 7.5 X, maintaining a "buy" rating.
Risk hint
The death of uncontrollable pig epidemic occurred in the industry, the cost pressure caused by the uncontrollable rise in the price of grain and raw materials, and the possible impact of natural weather disasters such as floods on the normal construction and operation of pig farms.