Main points of investment
It is urgent to expand the capacity of domestic beef cattle breeding: due to China's traditional diet structure, China's current meat consumption is mainly pork. With the increasingly frequent exchanges between China and western countries, the demand for beef in China has increased greatly. China's beef consumption increased from 1.1 million tons in 1990 to 7.59 million tons in 2015, an increase of nearly seven times. However, since 2012, domestic beef demand has increased significantly, while domestic beef production has grown slowly, resulting in a rapid expansion of the gap between supply and demand in the domestic market. The gap between beef consumption and production in China in 2015 is 800000 tons. Based on the current average domestic beef price of 62.50 yuan / kg, there is still a gap of 50 billion yuan between supply and demand in China.
The introduction of 1 million beef cattle in Australia has been delayed: the formal signing of the China-Australia Free Trade Agreement in 2015 marks the official landing of China's agreement to import beef cattle from Australia, confirming that China will import 1 million beef cattle from Australia every year. In the first half of 2016, in order to prevent cliff changes in Australia's beef cattle industry, the Australian government introduced a new policy that local Australian farms must first go through a six-month breeding period if they want to export beef cattle to China. We believe that the introduction of this new policy will further delay the introduction of beef cattle from Australia, and the domestic beef supply will continue to fall short of demand. And the 1 million beef cattle imported from Australia are basically ordinary beef cattle, although there is some compensation in quantity, but it has little impact on the domestic high-end beef market.
The new Angus beef products open room for growth: in view of the domestic scarce high-end beef market, the company steadily carried out the strategic model of "taking two ends with the middle" in 2015 to open up the introduction channels of Angus cattle at home and abroad.
At present, the scale of the company's own breeding is about 2000 Angus cattle, and there are more than 10,000 Angus cattle under the "company + peasant household" breeding mode. It is estimated that the annual output from 2016 to 2018 will be 1500, 000.
Valuation and rating: we predict that the EPS of the company from 2016 to 2018 will be 0.01,0.10,0.18 yuan respectively, and the closing price on June 8, 2016 will be 1646 times, 161 times and 88 times the dynamic PE for 2016-2018, respectively. We believe that the company has basically completed its layout with the help of the "Big Beef" strategy, and this year, with the completion of Angus Beef and the completion of the corresponding channel construction, it will greatly improve the company's profitability. We are optimistic about the development prospect of the company in the domestic high-end beef market and suggest long-term attention.
Risk tips: beef cattle out of the column size or below expectations, beef cattle prices or a sharp drop in profits or below expectations, sales channel construction or not up to expectations, industry policies or changes in beef cattle imports.
