Main points of investment
Event: the company announced a forecast of 2016 results, with an estimated profit of 45-9.5 million yuan for the whole year, a decrease of 58.9%-80.5% compared with the same period last year, of which the fourth-quarter profit is expected to be 62.23 million yuan-67.23 million yuan, a year-on-year increase of 1594% MUE 1723%, significantly exceeding previous market expectations.
The turnaround increased sharply in the fourth quarter, with great flexibility in the follow-up. The company expects to make a profit of 62.23 million yuan to 67.23 million yuan in the fourth quarter, a year-on-year increase of 1594% and 1723%, turning losses into profits for the whole year. We believe that the main reasons for the company's performance significantly exceeding market expectations are as follows: 1. The supply and demand of the raw milk industry continues to improve, the industry reverses, and the raw milk price has entered a rising trend. From the sales data, the company's raw milk sales volume has increased steadily, and both volume and price have driven performance improvement. 2. Dairy products release performance, with the completion of the integration of Ximu dairy industry, the production capacity of dairy products has been released rapidly, and a number of new products have been sold well.
Looking to the future, we believe that the company's performance is expected to blossom in an all-round way and has great flexibility. On the one hand, the price of raw milk has reversed upward, and as the joint venture pasture is gradually put into production, the company will benefit from the dual drive of rising volume and price of raw milk business. On the other hand, the company's layout of dairy products, meat products and forage will gradually enter the harvest period. In addition, the cost of suppressing the company's performance for a long time is expected to ease.
Raw milk reversed upward, the company's raw milk business volume and price rose the most benefit. Under the stimulation of the continuous capacity loss of the industry, raw milk prices have bottomed out since the second half of this year, the industry reversal logic has been fulfilled, and raw milk prices will enter a trend upward cycle. At the same time, the company's production has been released rapidly, and in terms of self-raised cows, the number of self-raised cows increased significantly by 4470 in 2015. at present, these cows have entered the lactation period, and the per unit yield has increased steadily; in terms of joint venture farms, the production capacity of 33000 cows jointly built with the eighth division of farmers in 2014 has been put in place one after another. The company's raw milk business will benefit from the double drive of rising volume and price and become the biggest attraction.
Beef cattle slaughtering is expected to become a new performance growth point. With the improvement of the consumption structure and the rapid growth of consumer demand for imported beef, the subsidiary Heng Animal Husbandry has become the first batch of five enterprises to receive a quota of 100000 live cattle per year. At present, the domestic beef consumption demand is strong, and the import of live cattle has good economic benefits. according to the estimated gross profit, the gross profit can reach 3860 yuan per head. After the project reaches production, it is expected to become a new performance growth point.
Investment advice: we believe that driven by the rising price of raw milk, the company's performance is expected to soar, and the gradual contribution of dairy and meat products is also a bright spot to improve valuations, and the annual performance forecast also confirms our previous expectations. recently, the company's stock price has been revised back, and investors are advised to focus on it. It is predicted that the company's profits for 16-18 years will be 7 million, 59 million and 131 million, corresponding to the current PE of 492,55 and 25 times, maintaining an overweight rating.
Risk tips: raw milk production is lower than expected; raw milk prices fall; dairy sales fall short of expectations
