Bullet financial view

Pig giant Wen’s shares failed to escape the negative impact of the pig cycle and handed over a huge loss of 13.4 billion yuan in 2021.

However, its share price began to rebound after falling to a low point at the end of July 2021, rising by more than 70% in the past nine months. Even under the recent decline of the overall stock market, its share price still showed a slow upward trend.

From the change of investors, although the huge loss of Wen’s shares “scared off” a large number of retail investors, it has been increased by hundreds of institutional investors. Recently, other pork stocks have also attracted frequent research from institutional investors, and a number of securities companies have given “buy” ratings.

After experiencing a general loss, has the bad position of pork stocks been exhausted? Is it time for pork stocks to copy the bottom?

1. First loss after listing
2. Objectively speaking, the 2021 financial report of Wen’s shares shows the fundamentals of serious losses. In 2021, Wen’s shares realized an operating revenue of 64.954 billion yuan, a year-on-year decrease of 13.31%; The net profit loss attributable to shareholders of listed companies was as high as 13.404 billion yuan, a year-on-year decrease of 280.51%.
3. In fact, such losses have long shown signs.
4. In the first quarter of 2021, Wen’s shares were still profitable, and the net profit attributable to the shareholders of the listed company was 544 million yuan, but it had decreased by 71.28% compared with the same period of the previous year. By the second quarter, Wen’s shares had fallen into a state of loss, with a loss of 2.498 billion yuan in the first half of the year. By the end of the third quarter, Wen’s shares had lost 9.701 billion yuan in nine months. In the third quarter alone, its loss had reached 7.204 billion yuan, which can be called “the worst pig enterprise”.
5. Compared with the performance of Wynn over the years, this is also its worst performance since its listing in 2015 - breaking the long-term profitability and turning to huge losses.
6. According to the data of Dongfang fortune choice, from 2015 to 2018, the revenue of Wen’s shares was about 48.2 billion yuan to 57.2 billion yuan, and soared to 73.12 billion yuan and 74.924 billion yuan in 2019 and 2020.
7. However, Wen’s share profits have been unstable. From 2015 to 2020, its net profits attributable to shareholders of listed companies were 6.205 billion yuan, 11.79 billion yuan, 6.751 billion yuan, 3.957 billion yuan, 13.967 billion yuan and 7.426 billion yuan respectively.
8. It is worth noting that in 2020, the profit of Wen’s shares has declined, down 46.83% compared with that in 2019. In the same period, the profits of muyuan shares and Zhengbang technology, which are also the “big four pig farmers”, are in a positive growth state, with an increase of 348.97% and 248.75% respectively. Although new hope has a negative growth, it has only slightly decreased by 1.94%.
9. “I think this difference is related to the different business composition of Wenshi shares from the other three companies. Besides pig breeding, Wenshi shares also have broiler breeding, which means that it faces not only the impact of pig cycle, but also the impact of chicken cycle. Muyuan shares mainly raise pigs. Zhengbang technology and new hope also have feed business in addition to pig breeding business, and their proportion in income is not low. At the same time, the profit will also decline in 2020 New hope has the same poultry industry as Wen’s shares. “ Xin Ziheng (a pseudonym), a food industry observer, said to “bullet wealth view”.
10. Xin Ziheng further pointed out that in 2019, affected by the African swine plague, pork prices rose sharply, and many consumers turned to buy chicken, fish and other meat for alternative consumption, which also drove the rise of chicken prices. “In 2019, Wen’s shares are equivalent to receiving the upward dividends of pig cycle and chicken cycle at the same time, so the performance has a very large growth.”
11. “However, the rising price of chicken has also led to the expansion of production capacity of broilers. Moreover, affected by the epidemic, the catering industry has closed down a large number of businesses and there is not enough market to consume. In 2020, the price of chicken will be sharply reduced, and Wen’s shares, as a chicken giant, will also be adversely affected. By 2021, the price of pigs will decline significantly, and the whole pig breeding industry will be hit by the pig cycle. The decline in the performance of Wen’s shares is in line with the development trend of the industry.” Xin Ziheng said.
12. According to the data of China pig breeding network, at the beginning of 2021, the price of live pigs (“foreign three yuan” varieties) in China was still at a high level of 36 yuan / kg, but by October 6, it had reached a low point of 10.63 yuan / kg. Although the pig price rebounded in the peak pork season at the end of the year, it was only 16 yuan per kilogram, which was “halved” compared with the beginning of the year.
13. In the financial report, Wen said frankly that one of the driving factors for the change of performance in 2021 is: “the price of pigs has fallen sharply, the company’s breeding cost is high, and the pig industry has a deep loss.” Specifically, in 2021, the average sales price of hairy pigs of Wen’s shares was 17.39 yuan / kg, a year-on-year decrease of 48.18%. However, at the same time, the continuous rise in the price of feed raw materials, the fattening of some pig seedlings purchased by the company and the continuous promotion of pig breeding optimization have pushed up the cost of pig breeding.
14. In 2021, the operating cost of Wynn’s pig business reached 38.457 billion yuan, a year-on-year increase of 19.55%, and the gross profit margin decreased from 30.58% in 2020 to - 30.39% in 2021.
15. In addition, due to the high cost of purchased breeding pigs in the early stage and the low utilization rate of breeding pigs affected by epidemic diseases, the book value is high, and the calculated recoverable amount is small. Wen’s shares have made an impairment provision of about 2 billion yuan for the current consumable biological assets and productive biological assets, of which the impairment of breeding pigs is 1.907 billion yuan.
16. According to the financial report of Wen’s shares, the development of its broiler business in 2021 was better than that of the pig business - broiler products brought revenue of 30.328 billion yuan, accounting for 46.69% of the revenue, compared with 32.43% in 2020; The proportion of pork products in the revenue decreased from 61.85% in 2020 to 45.41% in 2021, and the revenue was 29.494 billion yuan, a decrease of 16.849 billion yuan compared with 2020.
17. However, the better developed broiler business of Wen’s shares is not enough to resist the threatening pig cycle. It also said frankly that “the profit of chicken business only makes up for the loss of pig business”.
18. From the perspective of the whole industry, pig enterprises suffering from the hurricane of pig cycle