Shuanghui Development (000895) 19Q1 Comment: Performance exceeded expectations and slaughter volume and profit hit a new high
Investment highlights: Event: The company released its 2019 first quarter report, with revenue of 12 billion yuan, a slight decrease of 0 in ten years.
3%, net profit attributable to mother 12.
7.9 billion, an increase of 20 in ten years.
At 3%, we forecast the company’s 19Q1 revenue and net profit attributable to mothers to increase by -2% and 12%, respectively. The company’s performance exceeds market expectations.
Investment rating and estimation: Maintain profit forecast, forecast EPS for 2019-2021 to be 1.
6 yuan, 1.
82 yuan, 2 yuan, each increase by 7.
5%, the current sustainable corresponding PE for 2019-2021 is 16x, 14x, 13x, maintain BUY rating.
We are optimistic about the company’s core logic: 1. Under the African swine fever epidemic, the local government’s crackdown on private slaughter will bring space to large-scale slaughter companies. At the same time, due to the existence of regional price differences and brand premiums, the company is expected to achieve scaleGood for both.
2. The most difficult period for meat products has passed. Since 2018, the company has adjusted all aspects of research and development, products, channels, marketing, personnel and incentives around “adjusting the structure”, and determined the long-term improvement trend.
3. At the high point of the pig cycle, the company is expected to once again leapfrog the ton price and ton profit, and the cost pressure is less than the market’s pessimistic expectations.
4. From the three perspectives of capacity utilization, net interest rate and dividend rate, the company is expected to maintain high ROE and high conversion rate.
In 19Q1, slaughter volume and profit rose to a record high, exceeding market expectations.
1Q1 slaughter income 70.
07 billion, a decline of 0 every year.
62%, of which 57 were foreign trade income.
3.4 billion, down 5 previously.
2%, inward income 12.
7.3 billion, an increase of 27% over the same period. The decline in foreign trade income was mainly due to the decline in pig prices. The price of white strip meat in 19Q1 fell by 6%, and the sales of raw fresh meat increased by 1%.
Looking at the volume and price, the slaughter volume in 19Q1 was 472.
70,000 heads, an increase of 20 in ten years.
71%, slaughter volume still achieved double-digit growth under the high base of 18Q1 and the African swine fever epidemic, exceeding market expectations.
The slaughter volume growth rate is significantly higher than the external sales growth rate. The main reasons are: 1. The internal transfer has increased significantly; 2. The inventory has increased significantly.
Profit side, slaughter operating profit 5.
3.6 billion, an increase of 131 in ten years.
54%, operating margin of 7.
65%, an increase of 4 per year.
At 37%, the average profit of slaughter heads has increased by 130% each year, and the profit of slaughter volume has reached a record high.
The main reasons for the significant increase in slaughtering profits are: 1. Productivity increased by slaughtering volume and lower unit cost; 2. Spreads exist in the African swine fever epidemic. Shuanghui takes full advantage of the capacity of the nationwide layout to realize the allocation of orders among regions.; 3, increase the proportion of frozen products increased.
Looking ahead to 2019, the upward pressure on pig prices exists objectively. The market generally believes that rising pig prices will not be able to bear the pressure on large amounts of slaughter, but we believe that this company is still expected to achieve both volume and profit.
In 19Q1, the slaughter volume and profit increased, which gradually increased the basis for alternative slaughtering business growth.
Under the African swine fever epidemic, the local government’s crackdown on private slaughter will bring market space to large-scale slaughtering companies. The company will also actively seize the opportunity to continue to promote the “slaughter on scale” strategy. We are still optimistic about Shuanghui slaughtering in the medium and long term.Increase in occupancy and release of profit elasticity.
As the volume and price of meat products have risen, income has gradually improved, and profits are under pressure, but there is no need to be overly pessimistic.
1Q19 meat products revenue 58.
6.4 billion, an annual increase of 4.
At 16%, the sales volume is 38, with an annual increase of 2%.3%, the ton price increases by 1 every year.
8%. With the direct price increase at the end of 18 and a high base of sales in 18Q1, the sales of meat products in 19Q1 still achieved a small increase. The ton price increased and the major structural upgrades and direct price increases.
We expect that premium meat products will still achieve both volume and price increases, and revenue will further improve.
On the profit side, the operating profit of meat products in 19Q1 was 9.
6.9 billion, down 9% in the past, average profit per ton fell 11%, the main reasons for the pressure on meat products are: 1. Increased market share due to direct price increases and product structure adjustment; 2. Increased employee compensation; 3. Excellent chicken pricesimprovement.
The general increase in pig prices in the market has brought tremendous pressure on the cost of Shuanghui meat products, but in fact pig prices are not the core variable that affects the profitability of meat products. The company can increase prices by directly increasing prices, increasing imports, and stocking frozen meat.To calm down cost fluctuations.
In the past 10 years, every significant jump in the ton price and ton profit of Shuanghui meat products was achieved at the high point of the pig cycle. In 2019, the pig price has entered the upward cycle again. The company has twice directly conducted some meat products.Raise prices to cope with pressure from rising costs.
After President Ma Xiangjie took office at the end of 2017, the company opened a new path for meat product adjustment and reform.
Since 2018, the company has made a series of adjustments on all aspects of meat products, including R & D, products, channels, marketing, personnel, and incentives. The adjustment of product structure is a long-term process, and low-end products will be eliminated.Facing the pain, the situation of coexistence of new and old products will persist for a long time. Due to the fragmentation of industry demand and the company’s strategic choice in product development, it may be difficult to produce a second large single product of the “king of kings” level.Recovery in meat sales is slow.
However, the 武汉夜网论坛 company’s senior management team has a clear understanding of its own past problems, and has clarified its strategies and adjustment measures for the current contradictions. The thinking and direction are correct, but the process is long, and the long-term improvement and good trend aredefinite.
Highest performing catalyst: Higher-than-expected revenue and profit growth Core assumptions Risk: Food safety incident