New hope pig business does not meet expectations

Since September this year, the share price of new hope (000876) has been on the decline track, dropping from 42 yuan / share to around 20 yuan / share, and the share price has been slashed. In the face of this situation, on December 27 (Sunday), new hope urgently held an investor exchange meeting, which mainly included 17 securities companies and institutions as well as 10 natural person shareholders. The reporter of securities times · e company learned that in 2020, the development of new hope pig business did not meet the expectation, and some indicators deviated from the development plan and the achievement at the end of the year. New hope once proposed to sell 5 million self owned piglets in 2020, but the actual number of self owned piglets is about 4 million, with a gap of nearly 1 million. In the latest investor exchange meeting, new hope “revealed” four major gaps and deficiencies. The increase in the number of fattening piglets purchased directly raised the breeding cost of new hope. < / P > < p > Hu Ji, Secretary of new hope, said frankly at the investor exchange meeting that many investors’ book profits have retreated significantly compared with the high points, and some of them have increased financing leverage and are under great pressure. Based on this, New Hope mainly communicates with you about the business development of listed companies and some issues concerned by the market, as well as the future development pattern of new hope.

Hu Ji said that novel coronavirus pneumonia and the downward impact of pig prices will be hit this year, but this year’s revenue and profits will be the highest since its establishment. The combined revenue is expected to be over 100 billion for the first time. It is estimated that the annual external sales volume of new hope feed is more than 17 million tons, with a year-on-year growth of nearly 20%, and the total domestic sales volume will be close to 24 million tons, which is expected to be the first enterprise in the industry with annual sales volume exceeding 20 million tons. The overall profit of the poultry sector has fallen, but the proportion of commodity self-supporting has increased rapidly. The proportion of self-supporting broilers has increased from 20% at the beginning of the year to 50% at the end of the year, while the proportion of self-supporting ducks has increased from 20% at the beginning of the year to 50% at From 2% at the beginning of the year to 20% at the end of the year. < / P > < p > as the most important investment field of new hope, 2020 is the fastest year for the company’s pig business. In 2017, new hope exported about 1.7 million pigs, 2.5 million pigs in 2018 and 3.5 million pigs in 2019, achieving several leaps. < p > < p > Hu Ji revealed that previously, new hope mentioned that 8 million heads are expected to be sold in 2020, which has been completed by December 27, realizing the goal set at the beginning of the year. According to this calculation, the number of pigs raised by new hope has increased by more than four times in three years. If the internal assessment target of 25 million pigs can be achieved by next year, it may increase by nearly 10 times in three years. The growth rate is very fast in the history of the industry. < / P > < p > in terms of breeding pig reserve, as of mid December, the total number of new hope breeding pigs has reached 2.16 million. Among them, more than 1 million parents can reproduce (plus 1.2 million ggpgp). Hu Ji pointed out that if compared with the 550000 breeding pigs at the end of 2019, it will be 4 times of that at the end of 2019; if compared with the end of 2018, it will achieve a growth of more than 25 times in two years, which will lay a good foundation for the development and marketing of pig industry in the future. < / P > < p > although new hope has achieved relatively large growth compared with the past, compared with the market expectation and the challenge target set by new hope at the beginning of the year, there are still many deficiencies in the company’s pig business. < / P > < p > the reporter of securities times · e company noticed that the relevant senior management of new hope also faced it calmly, and carried out a review and resumption. In the latest investor exchange meeting, new hope “revealed” four major gaps. First, there is a certain gap in the structure of listing. In the annual report of 2019, new hope once proposed that the number of self-produced piglets will exceed 5 million in 2020, and there is still a gap. New hope said that due to some time lag, the number of fattening pigs is less than expected, and the number of fattening piglets purchased is higher. These structures will also affect the profits of new hope’s pig industry this year. < / P > < p > in the first half of 2020, new hope will sell 2.12 million pigs, of which about 1.27 million piglets will be fattened by outsourcing, accounting for more than half of the total. In November, new hope disclosed through the record of investor relations activities that during the period from January to September, the fattening cost of purchased piglets was 29.7 yuan / kg, while that of self-produced piglets was about 13.9 yuan / kg. Obviously, the fattening quantity of purchased piglets will go up, which will directly raise the breeding cost of new hope. Second, there is a gap in the total cost of fattening self-produced piglets. New hope believes that compared with the goal set by the company itself, it has not done enough to reduce the cost, and has not effectively reduced the full cost of self-produced piglet fattening throughout the year. < / P > < p > previously, new hope put forward a plan to reduce the cost from 14 yuan in the first half of the year to 13 yuan by the end of the year, but the full cost of fattening self-produced piglets in the second half of the year has been more than 14 yuan / kg. In November, due to the increase of sows elimination and feed cost, the cost of the month reached more than 15 yuan / kg. Third, the gap in development speed. New hope revealed that this was mainly due to the unsatisfactory breeding progress, which affected the marketing structure, especially the proportion of self-produced piglet fattening, corresponding to the overall pig breeding progress lagging by one quarter. The goal of self-produced piglet fattening, which could have been completed in the fourth quarter, will not be realized until the first quarter of next year, when the self-produced piglet fattening can be rapidly improved. < / P > < p > finally, there is a gap between new hope’s self-cultivation and fertilization. In the annual report of 2019, new hope once mentioned that it plans to sell 50% self fattening pigs in the whole year, but at present, the gap is still relatively large. < / P > < p > in response to this key problem, new hope explained that this is mainly to give priority to ensuring the quantity of self owned piglets. This year, more efforts have been put on the construction of pig breeding farms, and some fattening farms have been temporarily transformed into pig breeding farms. These factors have a greater impact on the proportion of self-cultivation and fertilization. This year, the company + farmer mode still accounts for a larger proportion. < / P > < p > in terms of engineering construction, new hope adopts the “trilateral engineering method”, that is, developing, constructing and entering the pig at the same time, changing the original three stages step-by-step and completely serial mode into partial parallel. However, in the large-scale promotion, there are many problems: for example, the success rate of large-scale breeding in this kind of breeding farm is low; the condition of renting pig farm is relatively poor, which brings pressure to epidemic prevention and control, affects the reserve population rate and breeding rhythm; the multiple transportation of temporary breeding farm and new pig farm also affects the success rate of breeding. < / P > < p > the reporter of securities times · e company noticed that the pregnancy rate of new hope 317 project was low, resulting in more than 40000 broods of breeding pigs not mated successfully in March. The first born piglets will be released in the first quarter of next year, and some fattening pigs with successful pregnancy in March will not grow well, and they will be released in the first quarter of next year if they do not reach the theoretical launch weight at the end of December. < / P > < p > in the breeding pig expansion, new hope revealed that the efficiency of ternary sow backcross technology in small-scale attempt is still relatively ideal, but when it is carried out on a large scale, there is a more obvious decline, which objectively affects the efficiency. For example, there are many problems in the management of reserve pigs. In order to seize the time, the first estrus induction was not done and the immune acclimation was carried out according to the procedure, so the health degree is not high; the mating of induced estrus boar and sperm collection boar was not timely, and the induced estrus and semen quality did not reach the ideal expectation. < / P > < p > in terms of team expansion, new hope has established six columns to carry out internal competition in recent two years in order to obtain resources for rapid development. The scale of pig breeding in the whole year is more than twice that of the previous year. New hope has a large number of young pig breeding cadres and employees to play an important role, but the team’s proficiency is insufficient, which also leads to the decline of production efficiency. By the middle of December, the total number of new hope pig raising team had exceeded 43000, four times more than that at the end of last year. < p > < p > interestingly, the reporter of securities times · e company noticed that new hope defined the activity on February 27 as an analyst meeting, including 17 institutions including Haitong Securities, China Merchants Securities, Tianfeng securities, Goldman Sachs Gaohua, Boshi fund, etc.; another 10 natural person shareholders attended the meeting, one of whom registered a very personalized “crazy spring man”. Hu Ji also revealed that the annual production capacity of the breeding pig farms that the company has put into operation has exceeded 30 million heads; the annual production capacity of the breeding pig farms under construction has exceeded 25 million heads, most of which will be completed before March to April next year, with a total of more than 55 million heads. From the perspective of total scale, compared with the end of 2018, it has almost doubled by seven times in two years. < / P > < p > at present, nearly 4 million fattening farms have been put into operation, and another fattening farm with more than 11 million is under construction, which is expected to be completed before June next year. After completion, it will have the self fattening capacity of more than 30 million per year. Hu Ji made it clear that up to now, new hope still takes 25 million live pigs as its internal assessment target for next year. In principle, it hopes that the fattening part of purchased piglets will be controlled within 3 million, and others will be realized through new hope’s own system. < / P > < p > capital expenditure is closely related to engineering construction. In 2019, new hope’s capital expenditure is more than 9 billion yuan, which has reached more than 25 billion yuan in the first three quarters of 2020, or more than 30 billion yuan in the whole year. According to the project construction that has been determined at present, new hope expects that the capital expenditure will exceed 30 billion yuan in 2021, and by the end of next year, the accumulated new investment in these three years will exceed 70 billion yuan. In this regard, Wang Shuhua, financial director of new hope, pointed out that in 2021, the company’s capital expenditure is expected to exceed 30 billion yuan, with pig business accounting for 90% and other sectors accounting for about 10%. It is estimated that in the first half of 2021, the cost of pig breeding will remain at about 15 yuan. With the continuous operation at full load, the cost will not exceed 14.5 yuan in the fourth quarter of 2021. With the increase of the proportion of self bred pigs and the decrease of the proportion of first born pigs, the cost is expected to continue to decline every quarter in 2022, and it is hoped that the cost will not exceed 13.5 yuan in the fourth quarter of 2022. < / P > < p > Zhang Minggui, executive chairman and President of new hope, believes that the company’s financial structure and capital expenditure structure are relatively benign, capital direct financing accounts for a relatively high proportion, and the proportion of long-term liabilities in 8-12 years is the largest, which has a considerable guarantee for suppressing the capital pressure of pig cycle, and also has certain advantages in the industry. < / P > < p > Disclaimer: the purpose of this article reprinted by CNFC is to convey more information, and it does not represent the opinions and positions of CNFC. The content of this article is for reference only, and does not constitute an investment proposal. 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