Event

The company announced its 2016 performance forecast that its annual profit is expected to be 450-9.5 million yuan, down 58.9%-80.53% from the same period last year, corresponding to a 16-year EPS of 0.021-0.045 yuan per share, which is higher than the previous forecast.

Brief comment

The company reversed its losses as its performance soared in the fourth quarter.

The company is expected to achieve a net profit of 6222.66-67.2266 million yuan in the fourth quarter alone, a year-on-year increase of 1594.41% Sam 1722.52%, and turn losses into profits for the whole year. Compared with the first three quarters, the company's performance in the fourth quarter has improved significantly. We believe that it may mainly benefit from the following aspects: 1. The company's dairy products are selling well, especially several new products launched last year, which are growing very fast in the Xinjiang market. It is likely to contribute more profits to the company in the fourth quarter. 2. The company produced 9355.83 tons of fresh milk in the fourth quarter, and the price of domestic fresh milk also rebounded steadily in the fourth quarter, which also made a great contribution to the company's performance.

For the whole year, the profit is expected to be 450-9.5 million yuan, and the net profit is 58.9%-80.53% lower than the same period last year. The sharp decline during the reporting period is mainly due to the following factors: 1. The increase in the construction of the basic facilities of the company's investment projects has led to an increase in financial expenses; 2. The price of fresh milk remained low in the first half of the year, but the feeding cost did not reduce, resulting in huge losses in the company's breeding business. 3. The dairy processing enterprise of the company, the western dairy industry, is still in the period of construction, the cost is relatively high, and there are many kinds of market products, so it will take some time for the recognition of "Xiyue", and the large expenditure on sales expenses during the reporting period; 4. In addition, the company's non-recurrent profit and loss month during the reporting period is about 8 million, which has a great impact on the company's net profit in 2016.

Benefit from the rise in milk prices, raw milk-related business has become the biggest attraction

The international price of large packages of powder began to rise in August 2016. on the evening of January 17, the price of Fonterra full-fat powder was 3283 US dollars per ton, and it was a high probability event that it stabilized at a relatively high level of 3500 US dollars per ton in the first half of this year. With the continuous rise of international milk prices, domestic raw milk prices may gradually exceed expectations, the latest purchase price of fresh milk in the main domestic producing areas has also reached 3.54 yuan / kg, the domestic milk price rising trend is obvious in the future. The western animal husbandry has a larger upstream farming layout, and the actual number of cows that can be controlled (self-management and joint ventures) is about 50,000, and more can influence the acquisition and control the purchase price. Therefore, the company will fully benefit from the rise in domestic milk prices in the first half of the year and directly contribute more profits to the company.

Yogurt and milk powder are expected to achieve rapid development.

With the promotion of consumption upgrading, while the demand for dairy products in Xinjiang is growing, the demand of mainland consumers for characteristic products in Xinjiang is also growing at a high speed. The company's ice cream yogurt, old yogurt and other products show rapid growth, the improvement of end-product sales means an increase in demand for raw milk, and further promote the growth of raw milk-related performance. In addition, the company's infant milk powder sales are relatively smooth, milk powder business has a certain growth. Two enterprises with infant milk powder production licenses in Xinjiang are all under the control of the company. The milk powder products launched by the company, such as "Mingxing", "Love Baby" and "Xiyue", have begun to be distributed in Shaanxi, Gansu, Xinjiang and other places. The market channel begins to expand gradually, and the company's milk powder business is expected to see rapid growth after the milk powder industry improves next year.

The layout of beef is improving day by day, and the slaughtering project of imported beef cattle has been put into production.

The layout of the company's beef business is improving day by day. Karwan Foods, a wholly-owned subsidiary, is mainly engaged in cattle and sheep slaughtering and processing business, with an annual production capacity of slaughtering 50, 000 cattle and 1 million sheep. At the same time, the company has the largest purebred "Red Angus" beef cattle population in Northwest China, with a breeding scale of about 10,000 beef cattle. The "isolation slaughtering Project of importing 100000 Australian Beef cattle a year" invested by the company in 2015 is expected to be put into production. Its cost advantages and location advantages will help the company to expand the beef market in East China and even the whole country. The project is expected to become a new profit point for the company.

We have always stressed that the company has reached an inflection point, and the results of the fourth quarter have also confirmed it. Recently, the company's stock price has been greatly adjusted. We think that the company will be more flexible next year, so we suggest that we should focus on bargain hunting. Keep buying and keep the target price at 22 yuan.