Event: the company released its annual report in 2019, with operating income of 2.4 billion, a decrease of 14.30% compared with the same period last year, and a net profit of 141 million, compared with a loss of 287 million in the same period last year. At the same time, the company uses the capital accumulation fund to distribute a cash dividend of 0.2 yuan (including tax) to all shareholders by increasing 3 shares for every 10 shares.
The company's performance is in line with expectations, pig farming profits increased quarter by quarter, and feed business grew steadily.
Comments: the profit of pig breeding is increased, and the feed business is sound.
Live pigs: both quantity and price rise. In 2019, the company produced 393700 pigs, an increase of 12.94% over the same period last year.
At the same time, benefiting from the sharp rise in pig prices, the pig farming business contributed a gross profit of 210 million yuan, an increase of 668.36% over the same period last year. The overall contribution of the pig farming business to net profit is about 52 million.
Feed: improve profitability. Affected by the sharp decline in pig stocks, the company's feed sales in 2019 were 598800 tons (including domestic sales of 161200 tons), down 22.15 percent from the same period last year. However, by adjusting the product structure and market management strategy and strengthening the recovery of accounts receivable, the company's feed gross profit margin increased by 2.53 pct to 14.30%, contributing about 58 million of the net profit.
Animal protection business grew steadily, and pig medicine dragged down overall income, but profits increased, contributing about 10 million to net profit, up 3.5 per cent from the same period last year. Telecom value-added services contributed 24 million of the net profit.
Pig breeding continues to increase, and the high increase in the number of pigs is guaranteed.
Major shareholders fully support the company's development of pig farming, and have provided the company with 300 million low-interest loans, while the company plans to raise 860 million more funds, of which 655 million are subscribed by major shareholders.
Fewer trusteeships and higher profits. There are only two pig farms still in custody at the end of 2019, and the proportion of hosted pigs will decrease significantly in 2020. Pig price upward cycle, the company will more fully enjoy the industry dividend.
There is a high increase in hurdles. According to the conditions of the company's equity incentive unlocking, the number of live pigs from 2020 to 2022 was 790000, 1.39 million and 2.38 million respectively. The new column in 2020 mainly comes from the iron project that has been put into production and Fujian Yichun subsidiary, which is guaranteed to achieve the goal.
Raise profit forecast and maintain "buy" rating
The price of live pigs is high, and the number of pigs released by the company is higher than expected (an increase of 33% in March), so the profit forecast for 2020-2021 is raised and the profit forecast for 2022 is added. It is estimated that the EPS of the company from 2020 to 2022 will be 2.15,2.27 and 2.35 yuan respectively (new non-public offering capital will not be considered for the time being).
Pig out of the column high growth superimposed industry high bearing, continue to be optimistic about the company, maintain the "buy" rating.
Risk hint: the risk of infection and non-plague epidemic, and the risk of capacity increase is lower than expected.