Makihara (002714) Annual Report 2019 Comment: Inflection Point Confirms High-Growth Prospects
Fixed assets, construction in progress, productive biological assets and capital expenditures have all increased rapidly, and the growth rate has increased earlier than 19Q3.
The company is expected to return to the high-growth channel since 2020.
Pig prices are expected to maintain a long-term boom.
The company has obvious cost advantages and has a unique breeding system, which is expected to form a moat with a long-term market share of 10% -15%.
Maintain target price of 158 yuan, maintain “Buy” rating.
The price of pigs has reversed and profits have soared.
In 2019, the company achieved sales revenue of 202.
2.1 billion (51% growth over ten years), attributable net profit of 61.
1.4 billion (10-year growth).
The increase in revenue and profit was mainly driven by the continued increase in pig prices.
According to the reported quantity, the company sold 10.25 million live pigs (down 7% year-on-year), which was mainly caused by the fatal improvement of the company’s entire process caused by the African swine fever epidemic; the average sales price of commercial pigs was about 18.
6 yuan / kg (up 60%), mainly due to the reduction in domestic pig supply caused by African swine fever; the complete cost of commercial pigs is about 13.
6 yuan / kg, the annual improvement and improvement before 2018 is mainly due to the supplement of non-disease prevention and control and pig farm transformation. The decline in production capacity utilization has resulted in an increase in the average cost amortization of the head; the overall head profit is about 596 yuan.
The inflection point was confirmed and the return to high-speed expansion.
In 19Q4, the company’s full cost and turnover were improved.
The full cost of putting 19Q4 fat pigs14.
1 yuan / kg, a decrease of 0 from the previous month.
2 yuan / kg; 19Q4 company sales volume reached 2.杭州桑拿洗浴会所32 million heads, an increase of 9% from the previous month; operating inflection points confirmed
As of the end of 2019, fixed assets increased by more than 39%, construction in progress increased by an additional 134%, and productive biological assets increased by more than 162%. As a result, capital expenditures expanded by 160%, and the growth rate is estimated to have been increasing in 19Q3.Building construction, sow expansion are returning to the high growth channel, which is expected to support the high production price or maintain a long-term boom in the next two years.
Under the impact of African swine fever, domestic breeding sow stocks continued to decline in the first three quarters of 2019. Although there was a slight increase in the fourth quarter, 1/3 of the sows were structurally inefficient.
We have gradually increased the domestic sow production capacity by more than 50%, and there is still no effective recovery.
It is expected that the pork gap will further expand in 2020, and the average internal pig price may reach 30-35 yuan / kg; pig prices will remain high in the next 2-4 years.
The moat is wide, with a market share of 10% -15%.
Scale, the company has established a unique recurrent dual breeding system (commercial hogs can be directly retained for use as breeding pigs) to ensure that it can still rapidly expand the size of breeding pigs in the industry in the absence of sows.
At the same time, the company’s cost advantage over listed companies in the same industry has been enlarged quarter by quarter in 2019.
The advantages of breeding pigs and cost are expected to form a moat for the company’s long-term growth.
The company or curve overtaking has become the largest pig enterprise in developing countries, and its market share may increase to 10% -15% in 2024.
Risk factors: Livestock and poultry prices rise more than expected; raw material prices fluctuate sharply; livestock and poultry epidemics.
Investment suggestion: The pig price will rise strongly and the business climate is expected to prolong. The company’s profit outlook is expected to increase year by year.
Maintain 2020/21 EPS forecast at 19.
69 yuan / 24.
40 yuan, plus EPS forecast for 2022 is 7.
Maintain target price of 158 yuan (equivalent to only 8 times PE in 2020), maintain “Buy” rating.