The pig company is under pressure to earn 80 million yuan a day in Muyuan...

The net profits of listed pig companies in the first quarter have suffered "Waterloo".
At present, only Muyuan shares are "out-of-the-box".
Net profits have increased by about 70% year-on-year, with an average daily net profit of about 80 million yuan
.

As the price of live pigs continues to fall, how can listed pig companies reverse their performance? Can Muyuan shares the last laugh?

The performance of listed pig companies is under pressure

Except for Muyuan, the performance of the top 10 listed pig companies in terms of slaughter volume can be described as "a mess
.

" Zhengbang Technology, New Hope, and Tianbang Co.

Regarding the decline in net profit, Zhengbang Technology, New Hope, and Tianbang Co.
, Ltd.
all said that they were affected by the drop in live pig prices
.

Before the announcement of the results, the listed pig companies are still optimistic about the long-term market situation of the industry.

According to the sales data report, the average sales price of pigs for New Hope, Muyuan, and Wen's are all around 23-26 yuan/kg, down 20.
01%, 13.
88%, and 7.
88% respectively from the previous month
.

Calculated at a cost of 17 yuan/kg, the profit of New Hope, Muyuan, and Wen’s hog gross profit has been narrowed to 6-9 yuan/kg, and in July 2020, the hog gross profit is still around 20 yuan/kg

After the first quarter report card was released, the capital market was also affected
.

As of 11 a.

It is worth noting that it may not be realistic for listed pig companies to pin their hopes of achieving improved performance on the price of live pigs
.

Zhu Zengyong, an associate researcher at the Beijing Institute of Animal Husbandry and Veterinary Medicine, Chinese Academy of Agricultural Sciences, told a reporter from China Business Daily: “From the perspective of the overall trend of pig prices this year, the high point of the annual pig price should have appeared before the Spring Festival this year.

Muyuan shares earn 80 million yuan a day

It is worth noting that despite the current downturn in the "pig cycle", Muyuan's net profit increased by 70% year-on-year
.

According to the performance forecast, Muyuan expects to achieve a net profit of 6.

A reporter from China Business Daily learned that Muyuan shares can make an average of about 80 million yuan a day in profits
.

What does Muyuan rely on to achieve counter-trend growth in net profit? According to Muyuan's announcement, although the price of live pigs fell in the first quarter, due to the expansion of the company's pig breeding scale, the company sold 7.

About half of the pigs on the national market come from Muyuan
.

According to statistics from a reporter from China Business Daily, in March this year, Muyuan shares accounted for 44% of the total slaughter volume of 10 listed pig companies with 2.
833 million heads
.

In the first quarter performance competition, Muyuan obviously won with an absolute advantage and became the big winner in this round of "pig cycle"
.
A person in charge of a domestic listed pig company told reporters: "The real advantage of leading companies is not to follow cyclical fluctuations, but to rely on advanced production and business models to achieve higher efficiency and lower costs.
The average level earns more.
When the price of pigs is low, other loss-making companies can still not lose, or even if everyone loses money, the company can lose less
.
And if the leading companies also lose money, then the whole industry will inevitably have a lot of losses With the withdrawal of production capacity, the supply of live pigs will be greatly reduced, and then the pig cycle will usher in an upward trend
.
This is the true meaning of investing in leading companies in the pig cycle
.
"

"Compensation by volume" may not work

The relevant person in charge of New Hope previously told reporters that in the down cycle of live pig prices, excellent pig companies can achieve cross-cycle growth through cost advantages
.
Judging the performance trend of listed pig companies is not solely based on the pig cycle and pig price, but the excess return brought by the advantage of operating efficiency
.

Although Muyuan shares its performance growth attributable to the increase in sales, at present, for other listed pig companies, blindly increasing production capacity and the strategy of "compensating by volume" may not work
.
Take Zhengbang Technology, which currently ranks second among listed companies in sales in the first quarter, as an example.
The faster the company's live pig sales growth, the more obvious the price drop will be
.

Cost control is the focus of competition among listed pig companies
.
The relevant person in charge of New Hope said that from the perspective of this cycle, pig companies with strong cost marginal advantages and biosafety prevention and control technologies will have more full performance
.
It is worth noting that the self-reproduction and self-raising pig-raising model adopted by Muyuan has certain advantages in cost control
.

The biggest feature of the self-reproduction and self-raising model is that companies do not need to purchase piglets out of the country
.
Why do so many companies start by purchasing piglets from outside? Zhu Zengyong said that compared with the self-breeding and self-raising model, it takes less time and money to purchase piglets from the breeding end, and the breeding cycle is also short
.

"If the self-breeding and self-raising model is adopted, in addition to the necessary infrastructure construction, the breeding end first needs to purchase gilts, and wait until the gilts grow to about 150 kg before they can be bred.
It takes at least 12% to slaughter the gilts from the gilts to the commercial pigs.
More than a month
.
However, pig companies purchase piglets out of the market and use existing construction to directly buy weaned piglets from the market for fattening.
It takes about five or six months from purchase to slaughter
.
” Zhu Zengyong said
.

In addition to Muyuan shares, New Hope has also begun to move closer to the self-reproduction and self-support model
.
The relevant person in charge of New Hope stated that the self-propagation and self-supporting model is superior to the "company + farmer" model in terms of biosafety prevention and control, farm hardware facilities and cost reduction
.
At present, the "company + farmer" model accounts for a relatively high proportion of the company's slaughter structure.
The subsequent company will continue to develop the "company + farmer" commercial pig breeding model, while gradually increasing its investment in the self-reproduction and self-raising model to improve self-reproduction.
The proportion of autotrophic model in the total slaughter
.

Who can have the last laugh in the "cost war"

The price of live pigs has fallen, and the cost determines the profitability of listed pig companies
.
According to the current cost, it is a loss for the breeding end
.
According to the data of Zhuochuang Information, based on the current fattening cost line, for some fattening households, according to the pig price of 22-23 yuan/kg, even if the big fat pigs of 140-150 kg or more are slaughtered, they will still lose money.
The slaughter standard The weight of pigs will increase the degree of loss
.
The self-reproduction and self-raising large-scale pig farms also hope that after the price of pigs rises, they will sell standard-weight pigs to increase their profitability
.

At present, the "Battle of Piglets" is being staged, and the listed pig companies put the hope of reducing costs on increasing the survival rate of piglets
.
According to the average piglet sales price announced by Muyuan Shares, the piglet was 1201.
44 yuan/head in 2019, an increase of 209.
70% year-on-year, and it rose to 1985.
49 yuan/head from January to September 2020
.

"As long as the supply increases, the price of live pigs will fall
.
For the breeding end, effective management and timely elimination of some sows with poor production performance can reduce the cost of piglets
.
If the number of effective piglets provided by each sow can be increased , It will be able to reduce the current cost per piglet from 500 yuan to about 300 yuan
.
” Zhu Zengyong said
.

Zhengbang Technology eliminated 350,000 low-efficiency breeding sows in the first quarter and is expected to eliminate about 400,000 sows with relatively poor performance in the first half of 2021
.
The relevant person in charge of Zhengbang Technology told reporters that the elimination of poorly performing sows is to update a batch of better-performing breeding pigs, which can reduce costs and increase future production capacity
.
New Hope also stated that with the stabilization and improvement of the new crown pneumonia epidemic and the phasing out of inefficient sows, the average production efficiency of enterprises will gradually increase
.

The competition around cost is fierce.
Which pig company can stand out? Can Muyuan, which won in the first quarter, maintain its advantage, and will it have the last laugh? China Business Daily reporters will continue to pay attention
.