Since June 2018, the strongest pig cycle has hit, and many pork-related listed companies have made a lot of money.

Sailing smoothly, Tianzhao Pig Industry (01248), the “king of pig breeders” that went public in Hong Kong at this time, can be described as a good time to pick.

According to the official website of the Hong Kong Stock Exchange, Tianzhao Pig submitted its prospectus information on September 2, then passed the Hong Kong Stock Exchange hearing on October 22, and commenced the IPO from October 29 to November 6. It is planned to issue 386.26 million H shares, with public sale accounting for 10%, international placement accounting for 90%, and an additional 15% over-allotment rights. HK$26.00 per share — HK$38.80, 200 shares per lot. It is expected to be listed on November 16.

According to information, Tianzhao Pig Industry was founded in 2004 by Tianzhao Food and Tianzhao Food. The company mainly focuses on breeding pigs upstream in the pig breeding chain. The products are mainly divided into two categories - breeding pigs and commercial pigs. Breeding pigs are purchased by customers from all over the country for their pig breeding, while commercial pigs are eventually slaughtered and used to produce pork products in areas surrounding pig farms.

Currently, with high-quality pig breeding resources and breeding techniques, the Tianzhao pig industry has had a certain scale effect in the pig farming industry. According to the prospectus, by the end of 2019, Tianzhao Pig had a breeding group of 18,000 purebred sows nationwide. According to the sales revenue of breeding pigs, Tianzhao Pig Industry ranked second, fourth, and first among all pig breeding and pig breeding companies in China from 2017 to 2019.

With the advantage of scale, the profitability of the Tianzhao pig industry is very strong.From 2017 to 2019, operating income was 475 million yuan, 449 million yuan, and 784 million yuan respectively, with a compound annual growth rate of 28.5%; realized net profit was 159 million yuan, 40 million yuan, and 485 million yuan, with a compound annual growth rate of 75%. In the first four months of this year, revenue increased 85% year on year to 352 million yuan, while net profit soared 572% year on year to 234 million yuan.

Based on this strong performance, Tianzhao Pig Industry has attracted a lot of attention since its debut in the capital market and received the attention of many investors.

It should be pointed out that in addition to profitability and scale effects attracting attention, the shareholder and cornerstone lineup behind Tianzhao Pig Industry is also worth mentioning.

According to the prospectus, currently Tianzhao Foods directly holds 62.36% of the shares in Tianzhao Pig Industry, which is the largest shareholder. Ms. Tan Jin, the founder of Tianzhao Pig Industry, holds 24.88% of the shares, Tianpan Technology holds 8.84% of the shares, and the remaining 3.92% of the shares are held by 12 individual shareholders.

(Picture source: Tianzhao Pig Industry prospectus)

The shareholders of Tianzhao Pig Industry seem inconspicuous on the surface, but the “shadow shareholders” behind them have a lot of history.

Tianzhao Food, the largest shareholder in Tianzhao Pig Industry, has 28.39% of the shares in a company called Hytek Tianson. This company is a company wholly owned by Hylife. HyLife, on the other hand, has 50.1% and 49.9% of the shares held by CPF Canada Holdings Corp and ITOCHU Corporation, respectively. Among them, ITOCHU Corporation is a comprehensive trading company ranked as one of the world's top 500 by “Fortune” weekly, while CPF Canada Holdings Corp is ultimately controlled by Chia Tai Group, a large group company listed in Thailand.

In fact, Tianzhao Pig Industry has a deeper relationship with Hylife: in 2008, Tianzhao Pig Industry introduced 866 high-quality breeding pigs and pig breeding technology from a Canadian company. This Canadian company is a wholly-owned subsidiary of Hylife. From partner derivatives to shareholders, on the one hand, it provides a strong guarantee for the Tianzhao pig industry's high-quality pig breeding resources, and on the other hand, it also reflects the strong recognition of Hylife, a major shareholder.

Also, it is worth mentioning that it is the cornerstone investment lineup of the Tianzhao pig industry. According to information from the Zhitong Finance App, Tianzhao Pig Industry's IPO has led to three cornerstones, namely Xinjiang Guoli Minsheng, China Lianplastic Group, and Mr. Zhong Zhaomin, a senior securities investor. The three parties have subscribed for a total of about 140 million yuan of shares, with a six-month lock-up period.

Specifically, Guoli Minsheng is a major shareholder of Yasui Foods, an A-share listed company. It belongs to the lower reaches of Tianzhao Pig Industry in the industrial chain. From this, it can be seen that Guoli Minsheng affirms Tianzhao Pig Industry's voice in the industry. Of course, with this level of relationship, there are more benefits that can be provided to the Tianzhao pig industry.

You need to know that Yasui Foods is the leading frozen food company in China, and its business scope is spread all over the country. Currently, it has 7 major production bases and 10 modern factories, a design capacity of 475,000 tons in 2019, an actual output of 513,000 tons, a capacity utilization rate of 108%, and production capacity is in short supply. With the gradual completion of the construction of various production base projects, production capacity is expected to increase from 475,000 tons to 1.085 million tons from 2019 to 2026. Supported by such strong production capacity, it has provided stable and guaranteed sales channels for the upstream Tianzhao pig industry.

Let's also take a look at China Liansu, a leading plastic pipeline company. Although this is a cross-border investment, it has also invested in a number of high-quality products based on its strong background. Currently, China Liansu has invested in about 15 companies, of which there is no shortage of potential stocks, such as DBS Investment Holdings Co., Ltd., Huatuo First Holdings Co., Ltd., and Shanghai Bangxin IoT Technology Co., Ltd. As a leading company that has invested in so many brands, its target of interest naturally still has quite a few outstanding points, and of course its subscription to Tianzhao Pig Industry also reflects its optimism about the Tianzhao pig industry from the side.

The third cornerstone investor, Mr. Zhong Zhaomin, is the founder of Oriental Marathon Investment Management Company and one of the earliest explorers in the field of value investment in China. As a senior long-term investor, he selected companies and emphasized that “a good company must have at least the two criteria of a good track and a good player”, that is, looking for a particularly competitive company in an industry where there is room for growth. Based on this theory, it can be seen that he is optimistic about the long-term investment value of the Tianzhao pig industry.

Looking at the above, with its excellent strength, Tianzhao Pig Industry not only has former shareholders with a large group background, but has also used this listing opportunity to attract a strong cornerstone investor team. Combined with the rapid performance growth trend shown in the prospectus data and the Matthew effect of the stronger players, Tianzhao Pig Industry is currently a dazzling new stock with full potential.