Summary of the report
The rising trend of poultry chain prices in 2018 has been established. Huaying's unique advantage lies in the large room for improvement of capacity utilization, the explosion of the performance of Down New Core, and a large amount of cash available for epitaxial mergers and acquisitions.
1. The chickens and ducks have been reversed in the New year, and it is time for Hua Ying to go up. As similar poultry consumer goods, chicken and duck have strong substitution and general price convergence. The profit of white feather broiler in 2016 is the result of structural adjustment, and the profit is transferred within the industry chain, which does not achieve the profit of the whole industry chain and is not sustainable. In 2018, the profits of all aspects of the white feather broiler industry chain are improving, the rising trend of broiler prices is established, and the rise of duck prices is irresistible. Over the years, Huaying has been subject to the industry downturn, capacity utilization has been insufficient, duck price reversal will lead to a rapid increase in capacity utilization. According to the 2011 peak profit of hairy duck and duck seedling per feather, it is estimated that under the full maternity leave, the two main businesses of Huaying duck and duck seedling in 2018 will generate a combined net profit of 340 million, with huge performance flexibility.
two。 The most entire industry chain, feather delicatessen makes a concerted effort. The company has layout from duck breeding to dining table, from main products to by-products, which can be called the most complete industrial chain of the duck industry; with the gradual completion of the supporting of the whole industry, the synergy benefit has been further improved. 1) Duck Duck Down: the newly established Huaying Xintang business scope is mainly for down processing and trade. The duck down market has bottomed out after two years of downturn in 2014 and 2015, and the company has made an accurate bottom. The performance commitment of Huaying Xintang from 2016 to 2018 is 0.60,0.85 and 110 million yuan respectively, which is equivalent to another Huaying. 2) cooked food: as of Q1 in 2018, the company's paper cash balance reached 1.53 billion yuan. Under the expectation of endogenous growth and epitaxial mergers and acquisitions, the cooked food business will enter a period of rapid development.
3. Reform three or two peach blossoms to help change the country. The company's long-term incentive mechanism is not in place and operating efficiency is inefficient. In 2018, 11 senior executives plan to invest 100 million yuan to increase their holdings, the chairman of the board has now increased their holdings by 10 million, and MBO has made steady progress. In 2017, the company's three expense rates were 7.16%, down 1.15 percentage points from the same period last year, and governance improved significantly. Supply-side reform advocates high quality, high price and large-scale operation. Decentralized feeding accounts for 90% of China's meat duck industry. Huaying, as the absolute leader in the scale and brand of the duck industry, will significantly benefit from the dividend of strict environmental protection to increase the concentration of the industry.
Profit forecast
We estimate that the homing net profit of the company in 2018 will be 300 million / 350 million yuan, corresponding to EPS 0.57 yuan 0.66 yuan. The company will be given 20-25 times PE in 2018, with a target price of 11.2-14 yuan, which is 60% RMB100% higher than the current price. For the first time, it will be covered and given a "buy" rating.
Risk hint
1. Sudden major epidemic risk: large-scale epidemic diseases will occur in the process of livestock breeding, resulting in livestock death, and have a greater negative impact on the consumer psychology of the general public, resulting in shrinking market demand, thus affecting the profitability of the industry and related enterprises.
two。 The price is lower than the expected risk: the price of livestock and meat falls sharply or rises by less than the cost, which affects the profitability of the industry and related companies, and there is a risk that it is difficult to sustain growth or even decline in future performance.
3. Raw material price fluctuation risk: the output and price of the main raw materials and agricultural products used in the company's production and operation are greatly affected by uncontrollable factors such as weather and market conditions. If the prices of major raw materials fluctuate sharply in the future, it will affect the profitability of the industry and related companies.