Events:

The company issued a semi-annual performance forecast for 2020, and the net profit attributed to shareholders of listed companies in the first half of the year ranged from 165 million yuan to 195 million yuan, an increase of 854.48% and 1028.02% over the same period last year.

1. Aquaculture business: excellent cost control ability and leading profit per head.

2020H1, the company sells 175000 live pigs, with a cumulative sales income of 498.8558 million yuan.

If the net profit of shareholders belonging to listed companies is 180 million yuan, taking into account the profits and losses of minority shareholders and headquarters expenses, the net profit of 2020H1 is expected to be about 290,300 million. Among them, the sales volume and profits of the feed business have increased compared with the same period last year, and the profit of the aquaculture business is expected to be 270-280 million.

According to the column structure disclosed by the announcement, the company is expected to produce 25000 breeding pigs and 75000 piglets and fattening pigs in the first half of the year, with an average profit of 1600 yuan per head, leading the industry in profitability, and the cost of fattening pigs is estimated to be about 16 yuan / kg.

The population advantage is obvious and the fattening cost is low. The company started as a pig breeding enterprise. at present, the company does not have three-yuan commercial pigs to two-yuan and purchased breeding pigs, the overall production efficiency of the population is excellent, and the cost control ability is strong.

2. Feed sector: thanks to the recovery of the industry, sales are expected to return to the growth lane in 2019, and the development of the company's feed business has been affected to a certain extent due to the decline in feed demand caused by the decline in pig stocks across the country. In the first half of the year, the company's feed sales continued to grow rapidly and its profitability rebounded. It is expected that in the next 2-3 years, with the recovery of national pig stocks, industry demand will gradually recover, superimposing the impact of the expansion of the company's own breeding business. Feed business is expected to return to growth.

3. Equity incentive-shareholders subscribe for a fixed increase, demonstrating confidence in development.

In 2020, the company launched a restricted stock incentive scheme designed to stimulate the execution of the breeding team, covering all senior executives and core business backbones. In addition, the company issued a fixed increase plan to raise no more than 799.8603 million yuan. The company's major shareholders and core executives promise to subscribe in full to raise capital. These measures show the determination and confidence of the company to strategically promote the development of aquaculture business. Based on this, we are very optimistic about the future development of aquaculture business.

Profit Forecast:

It is estimated that the number of pigs produced by the company in 202021 is estimated to be 2.4 million pigs in 2022, and its net profit in 2022 is expected to be 903 million / 12.07 / 1.404 billion, respectively, corresponding to an EPS of 1.32, 1.77 and 2.05 (total share capital is the total share capital after a non-public offering).

Risk Tips:

1. The risk of a sudden major epidemic: large-scale diseases such as African classical swine fever or bird flu will occur in the process of livestock breeding, which will lead to the death of livestock and have a greater negative impact on the consumer psychology of the general public, resulting in a shrinking market demand. thus affecting the profitability of the industry and related enterprises.

2, the risk that the price is lower than expected: the price of livestock and meat falls sharply or rises less than the rising rate of 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. The risk of price fluctuation of raw materials: the output and prices 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.

4. The listing of non-plague vaccine: the listing of effective non-plague vaccine will fundamentally block the spread of non-plague epidemic, the progress of capacity removal will be affected, and the increase of pig price may not meet expectations.

5. After the outbreak of COVID-19 epidemic, the opening time and operating rate of the slaughterhouse were lower than expected, the pig price was greatly affected, and the consumption was lower than expected.