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Tianfeng: China's pig cycle will drive global pig prices up, Wanzhou International (00288) welcomes the turning point!
March 24, 2019
1. Industry: It is expected that the upward trend of China's pig cycle will drive the global pig price to rise. It is expected that the import of pork will increase significantly in the next two years.
1) How do you view China's current pig cycle? This round of African piglets has exceeded market expectations for capacity reduction. According to the data of the Ministry of Agriculture and Rural Areas, in February 2019, the number of breeding sows fell by 5% from the previous month, down 19.1% year-on-year. The current cycle of capacity reduction is much higher than in the past, and the production capacity is still declining. Decreased efficiency (increased mortality led to a decline in MSY, leading to a slump in advances). It is expected that the pork gap in China will reach 10 million tons in this round. The increase in pig prices is expected to last 2-3 years. The high price of pigs is expected to be Breaking through 25 yuan / kg, some areas will hit 30 yuan / kg.
2) It is expected that China's imports of pork will increase significantly in the next two years. The United States (which has not yet discovered the African swine fever epidemic) is expected to become the first choice for Chinese pork imports. Domestic importers have greatly increased their global purchase orders and drastically pushed up global pig prices. The Chicago CME lean pig 1904 futures contract rose nearly 50% in the past month to 78 cents/lb, and the 1908 contract reached 99.3. Minutes/lb. Driven by the Chinese pig cycle, we expect US pig prices to continue to rise from the second half of 2019 to 2020, with a high probability of approaching the 2014 high of 133.9 cents/lb.
( 8.7 , 0.30 , 3.57% )
1) Benefiting from the increase in US pig prices, Smithfield's performance has reversed. In 2018, the company produced about 16.85 million pigs in the United States and 3.8 million in Europe. According to our calculations, the company's total cost of breeding in the United States is about 9.1 yuan / kg (without considering financial expenses). If the average price of live pigs in the United States in 2020 is 40% higher than that in 2018, we expect the company's average selling price to reach 74 cents per pound. (11.2 yuan / kg), the company's average operating profit is 276 yuan, the company is expected to sell 17.1 million heads in 2020, can achieve operating profit of about 4.7 billion (2014 company in the US pig breeding business to achieve operating profit of 2.1 billion yuan, this The reason for the significant increase in operating profit was three: the number of sales increased from 14.72 million in 2014 to 17 million, an increase of 16%; the price of corn soybean meal dropped so that the cost of farming decreased by 11.8 cents per pound ($0.63) compared with 2014. /kg); RMB depreciation, the US dollar against the RMB rose from 6.12 in 2014 to 6.86 in 2018, and the RMB depreciated by 12%), which was 5.7 billion more than the loss of 1 billion in 2018. The company has about 4 million pigs in Europe, and we estimate that the increase in European pig prices will lead to an increase in operating profit of the company's European pig business of about 900 million yuan. In total, the 2020 million pigs and pigs in Europe and the United States will bring 6.6 billion operating profit increments to the company, and Smithfield's performance will be reversed, and its market value will be greatly improved.
2) The imported pork business sector is expected to increase profitably. The company's pork trade, especially the Sino-US pork trade, is expected to increase. In 2016, Shuanghui developed about 300,000 tons of pork imports. We expect this round of imports to exceed 2016. It is estimated that the import volume will be 500,000 tons in 2020. Trade profit is expected to increase: In the United States, for example, according to the United States 78 cents / lb (11.59 yuan / Kg) pork prices, taking into account 62% of tariffs and 9% of value-added tax, and other fees and import meat discount, to the domestic The cost is about 25 yuan / Kg, in a loss state, if the tariff is reduced to 12%, and assuming that China's average pork price in 2020 reaches 28 yuan / Kg, the US pork price reached 85 cents / lb (12.83 yuan / Kg, compared to 2018 If the annual increase is 30%, the import profit per ton can be increased to 6,300 yuan / ton. If the company has a trade volume of 500,000 tons of pork in 2020 (the import trade of other countries is comparable to the US), the operating profit can be 3.2 billion yuan.
3) Shuanghui: African piglets accelerate the concentration of slaughtering production capacity, the company's inventory reserves and increased import boosted the company's performance to grow steadily
Under the background of environmental protection and prevention and control of African swine fever, the elimination of backward slaughtering capacity will accelerate, the concentration of domestic slaughter will accelerate, and the company's slaughtering capacity is expected to continue to be released. In 2018, the company's inventories reached 4.2 billion, a year-on-year increase of 44.4%. The increase in future imports will effectively offset the cost increase caused by the increase in pig prices. It is expected that the company's performance will continue to grow slightly from 2019 to 2020.
Give a "Buy" rating: assuming that the average price of live pigs in the United States from 2019 to 2020 is 10.03 yuan / kg and 11.2 yuan / kg, the US pig breeding business can achieve operating profit of 2.2 billion yuan and 4.7 billion yuan respectively, to promote the company's performance Significantly improved. We expect the company to achieve revenue of 1758/1944/190.2 billion in 2019-2021, an increase of 13.07%/10.58%/-2.15%, and a net profit of 111.00/141.10/14.073 billion yuan, an increase of 71.50%/27.12%/ -0.26%, corresponding EPS is 0.76/0.96/0.96 yuan, corresponding to the current stock price of PE is 9 times / 8 times / 8 times, considering that the company is in a high profit stage in the next two years, giving 12 times PE in 2020, the target The price is 13.5 Hong Kong dollars and the target market value is 200 billion Hong Kong dollars.
Risk warning: 1, price fluctuations; 2, tariff reduction is less than expected; 3, disease risk; 4, exchange rate risk.
zhttps://finance.sina.com.cn/stock/hk...h5177561.shtml
March 24, 2019
1. Industry: It is expected that the upward trend of China's pig cycle will drive the global pig price to rise. It is expected that the import of pork will increase significantly in the next two years.
1) How do you view China's current pig cycle? This round of African piglets has exceeded market expectations for capacity reduction. According to the data of the Ministry of Agriculture and Rural Areas, in February 2019, the number of breeding sows fell by 5% from the previous month, down 19.1% year-on-year. The current cycle of capacity reduction is much higher than in the past, and the production capacity is still declining. Decreased efficiency (increased mortality led to a decline in MSY, leading to a slump in advances). It is expected that the pork gap in China will reach 10 million tons in this round. The increase in pig prices is expected to last 2-3 years. The high price of pigs is expected to be Breaking through 25 yuan / kg, some areas will hit 30 yuan / kg.
2) It is expected that China's imports of pork will increase significantly in the next two years. The United States (which has not yet discovered the African swine fever epidemic) is expected to become the first choice for Chinese pork imports. Domestic importers have greatly increased their global purchase orders and drastically pushed up global pig prices. The Chicago CME lean pig 1904 futures contract rose nearly 50% in the past month to 78 cents/lb, and the 1908 contract reached 99.3. Minutes/lb. Driven by the Chinese pig cycle, we expect US pig prices to continue to rise from the second half of 2019 to 2020, with a high probability of approaching the 2014 high of 133.9 cents/lb.
( 8.7 , 0.30 , 3.57% )
1) Benefiting from the increase in US pig prices, Smithfield's performance has reversed. In 2018, the company produced about 16.85 million pigs in the United States and 3.8 million in Europe. According to our calculations, the company's total cost of breeding in the United States is about 9.1 yuan / kg (without considering financial expenses). If the average price of live pigs in the United States in 2020 is 40% higher than that in 2018, we expect the company's average selling price to reach 74 cents per pound. (11.2 yuan / kg), the company's average operating profit is 276 yuan, the company is expected to sell 17.1 million heads in 2020, can achieve operating profit of about 4.7 billion (2014 company in the US pig breeding business to achieve operating profit of 2.1 billion yuan, this The reason for the significant increase in operating profit was three: the number of sales increased from 14.72 million in 2014 to 17 million, an increase of 16%; the price of corn soybean meal dropped so that the cost of farming decreased by 11.8 cents per pound ($0.63) compared with 2014. /kg); RMB depreciation, the US dollar against the RMB rose from 6.12 in 2014 to 6.86 in 2018, and the RMB depreciated by 12%), which was 5.7 billion more than the loss of 1 billion in 2018. The company has about 4 million pigs in Europe, and we estimate that the increase in European pig prices will lead to an increase in operating profit of the company's European pig business of about 900 million yuan. In total, the 2020 million pigs and pigs in Europe and the United States will bring 6.6 billion operating profit increments to the company, and Smithfield's performance will be reversed, and its market value will be greatly improved.
2) The imported pork business sector is expected to increase profitably. The company's pork trade, especially the Sino-US pork trade, is expected to increase. In 2016, Shuanghui developed about 300,000 tons of pork imports. We expect this round of imports to exceed 2016. It is estimated that the import volume will be 500,000 tons in 2020. Trade profit is expected to increase: In the United States, for example, according to the United States 78 cents / lb (11.59 yuan / Kg) pork prices, taking into account 62% of tariffs and 9% of value-added tax, and other fees and import meat discount, to the domestic The cost is about 25 yuan / Kg, in a loss state, if the tariff is reduced to 12%, and assuming that China's average pork price in 2020 reaches 28 yuan / Kg, the US pork price reached 85 cents / lb (12.83 yuan / Kg, compared to 2018 If the annual increase is 30%, the import profit per ton can be increased to 6,300 yuan / ton. If the company has a trade volume of 500,000 tons of pork in 2020 (the import trade of other countries is comparable to the US), the operating profit can be 3.2 billion yuan.
3) Shuanghui: African piglets accelerate the concentration of slaughtering production capacity, the company's inventory reserves and increased import boosted the company's performance to grow steadily
Under the background of environmental protection and prevention and control of African swine fever, the elimination of backward slaughtering capacity will accelerate, the concentration of domestic slaughter will accelerate, and the company's slaughtering capacity is expected to continue to be released. In 2018, the company's inventories reached 4.2 billion, a year-on-year increase of 44.4%. The increase in future imports will effectively offset the cost increase caused by the increase in pig prices. It is expected that the company's performance will continue to grow slightly from 2019 to 2020.
Give a "Buy" rating: assuming that the average price of live pigs in the United States from 2019 to 2020 is 10.03 yuan / kg and 11.2 yuan / kg, the US pig breeding business can achieve operating profit of 2.2 billion yuan and 4.7 billion yuan respectively, to promote the company's performance Significantly improved. We expect the company to achieve revenue of 1758/1944/190.2 billion in 2019-2021, an increase of 13.07%/10.58%/-2.15%, and a net profit of 111.00/141.10/14.073 billion yuan, an increase of 71.50%/27.12%/ -0.26%, corresponding EPS is 0.76/0.96/0.96 yuan, corresponding to the current stock price of PE is 9 times / 8 times / 8 times, considering that the company is in a high profit stage in the next two years, giving 12 times PE in 2020, the target The price is 13.5 Hong Kong dollars and the target market value is 200 billion Hong Kong dollars.
Risk warning: 1, price fluctuations; 2, tariff reduction is less than expected; 3, disease risk; 4, exchange rate risk.
zhttps://finance.sina.com.cn/stock/hk...h5177561.shtml