Events:

The company released its annual report for 2020, with an operating income of 1.363 billion yuan, an increase of 7.72% over the same period last year, and a net profit of 185 million yuan belonging to shareholders of listed companies, an increase of 971.48% over the same period last year. Pig prices were high in the first half of the year, and the company released profits from its pig farming business.

Comments: high pig prices push up performance

Pig farming: when the quantity falls and the price rises, the profit is released. In the first half of the year, the company achieved 175000 live pigs, although the number decreased compared with the same period last year, but due to the sharp rise in pig prices over the same period last year, the company's pig farming business achieved an income of 500 million yuan, an increase of 51.85% over the same period last year. The company's pig farming business contributes the main profits.

Affected by the African classical swine fever and COVID-19 epidemic, feed and animal protection business revenue and profits are down from the same period last year. With the recovery of pig stocks across the country, it is expected to improve.

Pig breeding continues to increase, and the high increase in the number of pigs is guaranteed.

The company continues to increase the size of pig breeding. After the iron power project was put into production in 2019, the company plans to raise 670 million yuan in public offering to develop pig farming business in 2020. At present, the company is speeding up the "Shixing Uber Project", "Wujiang Uber Project", "Fujian Nanping Project" and a number of "light assets".

The construction of the project, at the same time, strengthen the land reserve of aquaculture projects in central, southern and eastern China, so as to lay a solid foundation for the landing of the company's "five-year Development Strategic Plan".

There is a high increase in hurdles. From 2020 to 2022, the company's pig production targets are 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. The company began to reserve a large amount of pig production capacity in the third quarter of 2019, and by the first half of 2020, the company had kept nearly 70,000 sows, laying a solid foundation for achieving the target for the whole year of 2020, and it is expected that the speed will increase significantly in the second half of the year.

Downgrade earnings forecast and maintain "buy" rating

In the first half of the year, the company's performance fell short of expectations, so we lowered our profit forecast. It is estimated that the net profit of the company from 2020 to 2022 is 648 million, 774 million and 828 million respectively; considering the effect of capital reserve and increasing equity, the EPS of the corresponding company from 2020 to 2022 is 1.15,1.38,1.47 yuan respectively (excluding the new share capital of private offering 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.