Large Sales Volume Can'T Resist The Decline Of Pork Price. In The First Quarter, Only Muyuan Shares Of Head Pig Enterprises Achieved Performance Growth

Dong Peng, researcher of the 21st Century Capital Research Institute

In the early morning of April 15, some people in a financial wechat group were still forwarding the first quarter performance forecast of pork stocks

Muyuan shares is expected to have a net profit of 6.7 billion yuan to 7.3 billion yuan in the first quarter, up 62% to 77% over the same period of last year; new hope expects a net profit of 120 million yuan to 180 million yuan, a decrease of 89% to 93% over the same period of last year.

What he didn't notice is that other pork stocks with the highest production capacity are also facing a decline. The profit forecast of Zhengbang technology and tianbang shares in the same period both exceeded 50%.

This is a systematic decline in the outlook of pig breeding industry, which is limited to the operation of listed companies.

According to the weekly data of average pig price in 22 provinces and cities, it can be seen that the pig price has dropped significantly in the first quarter of this year. The average price in the first quarter of 2020 will be 36.58 yuan / kg, and the price will drop to 31.53 yuan / kg in the first quarter of 2021, with a decrease rate of nearly 14%.

In particular, in late March, the price of pigs dropped significantly, and the price of 26 yuan / kg has fallen to the level of rapid rise of pig price in the third quarter of 2019. We should know that the above sample data is only the average value, and when the fall of pig price is fed back to the sales data of relevant listed companies, the year-on-year decline will be more obvious.

According to the 21st Century Capital Research Institute, with the first quarter performance of this year coming out, the performance growth cycle of pork stocks started in June 2019 has come to an end. Even though the pig prices are still repeated in the later period and the breeding enterprises continue to increase their volume in the second half of the year, most companies have been difficult to challenge the high profit base in 2020.

Of course, a single company needs to be analyzed separately, such as the performance level to further consolidate its leading position of muyuan shares.

The price of pig fell and the gross profit rate of the industry decreased

There are a large number of A-share companies incorporated into the wind pig industry, but their businesses are quite complex. Some are engaged in meat products, and some are originally poultry breeding or feed production enterprises.

Therefore, only muyuan shares, Wen's shares, Zhengbang technology and new hope, together with tianbang shares, which are the "substitutes", have the real value of observation. The pig output of these five listed companies is in the forefront of the industry, barely making up for the top five.

And the latest one with guiding significance is Zhengbang technology. The company said in its April 14 earnings forecast that net profit in the first quarter would drop by 66% to 77%.

Against this background, it is not surprising that the performance of new hope and tianbang shares declined the next day.

Among these five top pig enterprises, only muyuan shares have achieved year-on-year growth, but the growth rate is not higher than that of that year.

There are traces to follow. It is not necessary to release the performance forecast to know whether the listed companies make money or not. According to the monthly sales data, the industry prosperity can be traced.

Taking Zhengbang technology as an example, according to the monthly sales data disclosed by the company, it can be seen that the average selling price of pigs in the first quarter of 2021 is 27.7 yuan / kg, which is more than 21% lower than that of 35.2 yuan / kg in the same period of 2020.

Data from Zhuo Chuang information, a commodity consulting agency, also showed that the price of live pigs in the first quarter fell year-on-year, but the difference was that the price of pigs fell more or less.

Among them, Zhuo Chuang tracked the decline of the external three yuan pig data more obvious. In the first quarter of 2021, the average market price of domestic and foreign pigs dropped from 37.06 yuan / kg to 24.76 yuan / kg, and the average quarterly price was 30.96 yuan / kg, a year-on-year decrease of 16.99%.

The reason is that Zhuo Chuang information attributed it to "first, the non plague situation increased from January to February, and some medium-sized (type) pigs entered the market; second, the operators mistakenly overestimated the loss on hand and ignored the resumption of production of breeding enterprises, which led to the pig weight falling off the standard line."

The 21st Century Capital Research Institute believes that the occasional factors will not change the operation trend of the industry. Under the basic conditions of the recovery of pig production capacity, the supply-demand relationship of the industry will tend to be balanced, and the corresponding rational return of pig price is inevitable.

The direct impact of this on pig breeding enterprises is the decline of profit margin.

In 2020, the cost of live pigs fluctuated around 15 yuan / kg. In March this year, the average selling price of pigs was 23.21 yuan / kg, the gross profit was 8.21 yuan, and the gross profit rate was 35.37%.

In March 2020, the average selling price of the company's pigs was 31.38 yuan / kg, with a gross profit of 16.38 yuan and a gross profit margin of 52.2%. In other words, in March this year, the gross profit rate of muyuan shares decreased by nearly 17 percentage points year on year.

This is true of muyuan shares, which have obvious cost advantages. What's more, new hope and Zhengbang technology are expected to reduce their profit margins even higher.

Although the listed companies will not disclose the specific gross profit rate data of sub products in the first quarter report, when the regular report is officially released, the net interest rate of pork stocks and other indicators are bound to drop sharply.

So far, from the second half of 2019, the breeding industry growth cycle with the rise of pig prices as the main driving force has come to an end.

"Make up the price with quantity", the increase of sales volume decides the growth or not

According to the sales data from January to February, muyuan shares are still expected to achieve growth in the first quarter, even under the background of high profit base of 4.131 billion yuan in the first quarter of 2020.

As a result, the first quarter net profit of muyuan is expected to be between 6.3 billion yuan and 7.3 billion yuan, becoming the only company to achieve growth among the above-mentioned top pig enterprises.

At that time, the judgment basis was that the sales growth of muyuan shares could completely cover the impact of the decline in pig price.

Statistics show that from January to February, the total pig sales of muyuan shares reached 4.887 million, an increase of 349.2% year-on-year, equivalent to the sum of Wen's shares, Zhengbang technology and new hope.

Over the same period, the sales growth rates of Zhengbang technology and new hope were 89.8% and 87.68%, although the growth rate was very considerable, the growth rate was far lower than that of muyuan shares.

The above differences continued until March this year, and the growth rate of pig sales of muyuan shares continued to maintain the leading position in the whole industry, which also became the reason why the company's performance growth could be outstanding.

It should be pointed out that under the background of clear expectation of pig price falling in 2021, using the growth of sales volume to hedge the decline of pig price has become the primary coping strategy of various breeding enterprises.

New hope and other enterprises do not want to allow large-scale pig sales, the key lies in whether the company has the ability.

In mid March, muyuan shares, once caught in financial doubts, once explained the causes of its high profit margin. The most important information is that the company disclosed for the first time the "purchase" of new hope and other companies.

Taking January September 2020 as an example, four A-share head pig enterprises, including Wen's shares, new hope, Zhengbang technology and tianbang shares, purchased 2.629 million piglets and 469200 breeding pigs from muyuan.

A large proportion of pigs sold by new hope and other companies come from imported piglets. However, since the outbreak of non plague, the price of piglets began to rise earlier than that of live pigs in early 2019.

According to the data, in early 2019, the average price of piglets in 22 provinces and cities was 23.06 yuan / kg. By the end of March 2021, the price had risen to 108.29 yuan.

The price of piglets rose sharply, and the overall cost of pig fattening of new hope and other companies increased accordingly. On the contrary, the selling of muyuan shares of piglets was just the opposite, fully enjoying the dividend of profit expansion of piglet products.

In other words, when the pig price falls back to 20 yuan / kg, the enterprises with a high proportion of purchased piglets will lose money. Even if the pig price falls below 20 yuan / kg, muyuan shares will still be profitable.

"Pork turns into chicken ribs" in recession

After a continuous decline in the first quarter, the pig price has not improved so far, and the average pig price in 22 provinces and cities is still in a downward state until the beginning of April.

In this regard, Zhuo Chuang information also pointed out that in April, the pig price continuously broke through the psychological defense line of farmers, and the daily decline of pig price reached 0.6-1.0 yuan. At the same time, according to the pig cycle calculation, the number of fattening pigs in April continued to increase. In addition, the secondary fattening in the market generally increased in late March, and the supply chain was relatively sufficient when commercial pigs were put on the market from April to May.

It is worth noting that from the historical trend of pig prices, due to the low consumption season in the second quarter of the past year, the current pig price showed a downward trend.

When the consumption off-season is over, although the pig price may rebound to some extent, it is also faced with the suppression of large cycle pig supply increase, and it is difficult for the pig price to recover to the peak in 2020.

In terms of risk management at the enterprise level, the 21st Century Capital Research Institute believes that under the current market scale and capacity of pig futures, it is not enough to support the hedging demand of various pig industries, and relevant companies can only "iron out" the pig cycle as much as possible through their own business adjustment.

The main countermeasures are still the above-mentioned strategy of "supplementing price with quantity".

Including new hope, Zhengbang technology in the past two years are in the period of capacity expansion, and the next few years to make a detailed plan. Ruxin hope said in the previous investigation that "the internal assessment target of the company in 2021 is 25 million pigs", which is three times higher than the actual sales volume in 2020.

However, from the sales data of 7.72 million units in the first three months of this year and the expectation of more than 40 million units of some seller organizations, the company is also determined to large-scale production.

From the historical sales rhythm, the focus of each head pig enterprise is the second half of the year, when the pig sales will be significantly higher than the first half of the year.

It's just, there's a problem. The pig industry is similar to other cyclical industries. The increase in product price has a greater impact on the company's performance than the increase in sales volume. Therefore, it is only a helpless choice for the industry to make up for the price by volume in the downward cycle of pig price.

After the core driving force of performance growth, namely the rise of pig price, the difficulty of profit growth of related enterprises will increase. Even if it is stronger than muyuan shares, the high profit base in the past will set many barriers for the company's profit growth in the next few years.

It will be difficult to reproduce the high growth rate of more than 10 times in the past. Even, it may take more than five years for the whole industry to digest the soaring market from 2019 to 2020.