Minhe shares released three quarterly results for 2020: 20Q3 achieved revenue of 388 million yuan (- 49.29%) and net profit of-154 million yuan (- 140.07%). From January to September, the company achieved a revenue of 1.29 billion yuan (- 44.59%) and a net profit of 79 million yuan (- 93.71%). In terms of profitability, the company's comprehensive gross profit margin in the first three quarters was 23.33%, down 35.02% from the same period last year; the comprehensive net profit margin was 6.01%, down 47.78% from the same period last year; and the weighted ROE was 2.84%, down 68.86% from the same period last year. The expense rate during the period was 8.08%, an increase of 1.63 percentage points over the same period last year.
The decline in seedling prices combined with a surge in full costs, Q3 performance recorded a net loss. 20Q3 sold 83.77 million chickens, up 14.5% from the same period last year. Affected by the downturn in the poultry chain, the average sales price of 20Q3 chicken seedlings is about 2.05 yuan per feather, down 70.4 percent from the same period last year and 30.5 percent from the previous month. Mainly affected by the upward price of bulk raw materials, we estimate that the complete cost of 20Q3 chicken seedlings has risen sharply to about 4 yuan per feather.
When the poultry chain market is depressed and the full cost is on the rise, we estimate that 20Q3 has an average loss of 1.90 yuan per feather, a month-on-month decrease of 2.70 yuan per feather and a net loss of about 160 million yuan. Looking back, the superimposed alternative demand for parental generation chicken seedlings has weakened, and we expect 20Q4 chicken seedlings prices to remain low and the company's performance will continue to be under pressure. We expect the company's chicken seedling sales to grow by about 10% year on year in 2020, with an average loss of about 0.5 yuan per feather, and the chicken seedling business is expected to record a net loss of about 180 million yuan.
Pay attention to the production capacity expansion and industrial chain extension of chicken seedlings in the medium and long term. In July 2020, the company issued a non-public stock offering plan, which raised a total of no more than 650 million yuan. It is used for the annual deposit column 800000 sets of parent broiler breeding park project, annual incubation 100 million commercial broiler incubator project, meat and cooked food products processing project.
The company takes export products as its main business. At present, there are about 3.3 million sets of broiler chickens for parents and more than 300 million chickens are hatched annually. After this fundraising project is put into production, the sales scale of the company's chicken seedlings will be significantly expanded. We judge that there is a high probability that there will be a new upward cycle of the poultry chain, which is expected to significantly enhance the company's performance.
At present, the company has an annual slaughtering capacity of about 72000 tons and an annual production of more than 70,000 tons of chicken. This fund-raising project plans to add a total of 60,000 tons of meat production capacity, which forms a good match and coordination with the existing slaughtering capacity, which is conducive to increasing the added value of products through the extension of the industrial chain, thereby enhancing profitability and smoothing cyclical fluctuations.
Profit forecast and investment advice. Assuming that the company's out-of-seedling sales of commercial generation chickens from 2020 to 2022 are 350 million respectively, we estimate that the company's net return profit from 2020 to 2022 will be-1.33 million, respectively, and the corresponding EPS will be-0.54 million, and the corresponding BPS will be 8.62, 0.56 and 8.54 respectively. Give a valuation of 1.8-2.0 times PB in 2020, with a reasonable value range of 15.52-17.24 yuan, and a "neutral" rating.
Risk hint. The supply of the industry has increased significantly, and the price of chicken seedlings has dropped; bird flu and other epidemics.