Why are the performances of the same pig giants different?
Wen's huge loss, Muyuan made a lot of money, this is related to the development model of the two enterprises
Yangcheng Evening News reporter Li Zhiwen and intern Zhang Song Liang Yaqi
Recently, the pig industry giant Wen's Co., Ltd. (300498) released a performance report for the first half of the year.
The report shows that its net profit in the first half of the year was 2.498 billion yuan.
As soon as the news came out, people in the industry immediately exclaimed: Is it not profitable to raise pigs?
Because just a month ago, another giant Muyuan shares (002714) disclosed the interim performance forecast that it expects a net profit of 9.4 billion yuan to 10.2 billion yuan in the first half of the year, a year-on-year decrease of only 12.83%-5.42%.
One big loss, one big profit.
Wen's shares and Muyuan shares are the leaders in the pig industry. Why are their performances in the first half of the year so different?
Wen's previous big gains have now become huge losses
According to the information from Tianyan Check, Wen's Co., Ltd. is a cross-regional modern agricultural and animal husbandry group with livestock and poultry breeding as its main business and supporting related businesses.
On November 2, 2015, Wen's shares were listed on the Shenzhen Stock Exchange, with a market value of up to 260.9 billion yuan on the day of listing, which is known as the "first share of pig raising".
The reporter observed that since its listing, Wen's annual net profit has been at least several billion yuan, and in 2019 it was as high as 14.445 billion yuan. Even in 2020, which was severely affected by the epidemic, the net profit reached 7.484 billion yuan. .
Now in just one year, Wen's shares have gone from a big profit to a huge loss, which is shocking, and this is also the biggest loss since Wen's establishment.
In addition, the performance of Wen's shares in the capital market is not very good.
Since the beginning of this year, its stock price has fallen by about 25%, and it even fell to 12.14 yuan, the lowest since its listing on July 30.
Compared with the downturn of Wen's shares, the performance of Muyuan shares is quite impressive.
On July 15, the semi-annual performance forecast issued by Muyuan shares showed that it expects the net profit attributable to shareholders of listed companies in the first half of the year to be between 9.4 billion yuan and 10.2 billion yuan.
In the capital market, Muyuan shares have also performed better than Wen's shares. Since the beginning of this year, its stock price has fallen by 13.75%, and its current market value is 236.26 billion yuan, nearly three times that of Wen's shares.
Muyuan shares continue to advance in capacity expansion.
On the evening of August 11, the prospectus for the public offering of convertible bonds disclosed by Muyuan shares showed that Muyuan plans to invest 8.87 billion yuan to add 23 new pig breeding bases and increase the scale of 6.77 million pigs. The breeding scale of the company will expand the company's pig breeding scale by nearly 33%; it is planned to invest 2.287 billion yuan to build 4 new pig slaughter projects, with a total slaughter capacity of 13 million heads.
Different development models lead to different performance
Regarding the performance decline, Wen's Co., Ltd. explained that it was mainly due to the continuous decline in pork prices and the rise in prices of major feed ingredients, that is, the "pig cycle".
my country’s livestock and poultry breeding industry is still dominated by small and medium-sized farmers. Small and medium-sized farmers are susceptible to fluctuations in the sales price of livestock and poultry products, and their production stability is poor, which can easily lead to excessive or insufficient market supply, resulting in frequent misalignment of supply and demand of livestock and poultry products. The changes show obvious cyclical fluctuations.
The fluctuating cycle of commercial hogs is generally 3-5 years, which is habitually called the "pig cycle" in the industry.
At present, the selling price of live pigs is in the third round of "pig cycle".
In the same general environment, why is Muyuan's performance so different?
In fact, this is related to the different development models adopted by the two companies.
Wen's shares adopt the "company + farmer" subrogation model, which can enable the company to develop rapidly, but there are also major drawbacks.
Under this model, the cost of market-oriented piglet purchases accounts for about 40% of the price of commercial pigs for slaughter, which greatly increases the cost of breeding commercial pigs. When the market is good, it is still profitable, but once the market goes down, It is easy for the company to fall into a loss.
The other two giants in the pig industry, New Hope and Zhengbang Technology, also adopted the "company + farmer" subrogation model. Therefore, they also experienced huge losses in the first half of the year, with estimated losses of 3.45 billion and 1.45 billion yuan respectively.
The "self-reproduction and self-support" whole industry chain model adopted by Muyuan shares can not only effectively control production costs, but also solve food safety issues. Obvious cost advantage, and eventually made it become the only company among the four pig companies with the highest market value to achieve profitability in the first half of the year.
Since the whole industry chain model of "self-reproduction and self-support" has such a significant advantage, can Wen's shares and other companies adopt the Muyuan share model in the future?
In this regard, Bai Wenxi, chief economist of IPGlobal China, said that if the industry becomes a business model of self-reproduction and self-support, then the next round of the pig cycle will impact all leading pig companies.
Bo Wenxi also said that the companies that can survive the pig cycle and successfully beat the pig cycle are all pig companies that continue to innovate, lead cost, and manage efficiently.
The state comes forward to regulate the production capacity of pigs
Since the beginning of this year, the number of breeding sows in the country has continued to recover, and the supply capacity of the live pig market has been rapidly restored, resulting in a continuous decline in the sales price of live pigs, which has recently oscillated at the bottom.
The national level has also noticed the continued decline in pork prices.
On June 16 this year, the National Development and Reform Commission issued a three-level warning for excessive pork prices; on June 28, it announced that the price of pigs and food entered the first-level warning zone for excessive declines.
In July this year, in order to cope with the rapid fall in the prices of live pigs and pork, the National Development and Reform Commission listed a total of 50,000 tons of central frozen pork reserves for purchase and storage, and guided all localities to synchronize purchases and storage to stabilize market expectations.
On August 19, the Ministry of Agriculture and Rural Affairs received another news that the six departments jointly issued opinions on promoting the sustainable and healthy development of the pig industry. The Ministry of Agriculture and Rural Affairs is formulating an implementation plan for the regulation of pig production capacity and clarifying the number of breeding sows and large-scale breeding in each province. Core indicators such as the number of farm households, and the introduction of assessment methods, gradually establish a market-based control mechanism to prevent "rapid turns" and "turning sesame cakes", so that the breeding entities have stable policy expectations.
The relevant state departments have introduced relevant measures to stabilize the policy expectations of the breeding entities. This is a good thing, but for enterprises such as Wen's Co., Ltd., "strike iron still needs to be hard."
It is understood that Wen's shares are gradually upgrading from the "company + farmer" model to the "company + modern breeding community + farmer" model, and will iterate to the "company + modern industrial park + professional farmer" model in the future.
In this way, the farming scale, mechanization, automation and intelligence level of cooperative farmers will be improved, and the breeding production efficiency and benefits of cooperative farmers will be continuously improved. On the premise of ensuring the overall benefits of cooperative farmers, the company's overall breeding cost will be further reduced.
And Muyuan shares also stated that the development of standardized and large-scale breeding is an inevitable trend in the pig breeding industry, and the company needs to seize the opportunity to consolidate and enhance its leading position in the market.
In addition, there is a clear trend for large-scale pig breeding companies in the industry to extend the industrial chain downstream, and pig slaughtering and meat products businesses have important and positive significance for their future development.