"Pig Boss" Muyuan shares can not escape losses, slowing down expansion and reducing costs...

During the downturn of the pig cycle, even Muyuan, the leading pig company, lost 822 million yuan in the third quarter of 2021

Industry insiders believe that Muyuan's advantages in cost control make its losses during the downturn of pig prices smaller than those of its peers, and its financing when its performance plummets will enhance the company's cash liquidity and ease the pressure on subsequent working capital

Big losses in the third quarter

In 2021, pork prices continued to fall.

At the same time, Muyuan shares are in a period of incremental but not profitable growth

In an investor event in October, Muyuan said that in terms of current market prices, the entire industry is losing money

Large-scale expansion puts capital under pressure 

Industry insiders pointed out that in addition to the impact of the epidemic, the increase in feed costs, and the decline in pig prices, the previous large-scale expansion of pig companies such as Muyuan shares during the pig dividend period has also put their costs and funds under short-term pressure during the current trough of the pig cycle

According to the financial report, as of the third quarter of 2021, of the 266 subsidiaries and grandchildren companies that Muyuan shares are included in the consolidated financial statements, 48 ​​are new in 2019, 103 are new in 2020, and 25 are new in the first half of 2021.

The expansion of production capacity not only increases the cost in the short term, but also brings more capital maintenance requirements

According to Shen Meng, director of Chanson Capital, the health of a company’s assets does not entirely depend on the level of a company’s debt ratio.

The Beijing News reporter noted that in the 2021 third quarter report, Muyuan’s monetary capital was 9.

6 billion yuan will increase fundraising to ease pressure 

One side is the reduced cash, and the other is the rising debt.

Regarding the above-mentioned fixed increase, the market has different opinions

At present, Muyuan's statement in related announcements also clearly confirms the statement of "enhancing confidence

In addition to the confidence statement, it can be seen from the fundraising purpose that the core significance of this round of fixed increase is to supplement working capital

Kaiyuan Securities analyst Chen Xueli said in a research report that according to calculations, as of the end of the third quarter, Muyuan's working capital gap was 19.

On October 22, China Chengxin International, which is responsible for the rating of Muyuan’s bonds, also expressed concern about Muyuan’s funds.

Slow down projects and control costs to cope with low pig prices

In addition to the fixed increase, Muyuan is still adopting a variety of financing methods to ease funding pressure
.
On October 23, Muyuan said that the China Interbank Market Dealers Association decided to accept the registration of Muyuan’s 10 billion ultra-short-term financing bonds.
The registration limit is valid for 2 years and is jointly underwritten by China CITIC Bank, Bank of Communications and China Merchants Bank
.

At the same time, Muyuan started to slow down the pace of capacity construction
.
On October 20th, Kong Liang, the head of the Animal Husbandry and Veterinary Bureau of the Ministry of Agriculture and Rural Affairs, publicly stated that the relative oversupply of live pigs will continue for some time.
If the production capacity is not substantially reduced, the pig price downturn will be difficult to reverse, especially after the Spring Festival next year.
In the low season of consumption, pig prices may continue to fall, causing heavy losses in pig breeding
.

In the face of this situation, Muyuan shares in the investor activity record released on October 20th that the company has increased the management of new and construction projects, and suspended construction of non-essential construction in progress with slow progress.
For projects with fast construction progress, one issue is discussed, but except for individual projects that are adjusted due to major changes in objective conditions, there is no abandonment of projects that have already started
.
Muyuan shares predicts that the company's investment cash flow expenditure in the fourth quarter will be lower than that in the third quarter, and may remain at an average monthly average of about 1 billion yuan
.

In the process of relieving capital pressure and adjusting production capacity, cost control is also an important part
.
In response to this, Muyuan shares in the June roadshow revealed that it will continue to strengthen cost control through automation, standardization, and intelligent breeding, strengthening of breeding research and development, implementation of refined management of live pig nutrition, and nearby purchase of raw grains
.
In October, Muyuan said that the current cost reduction is mainly due to the reduction in average cost brought about by the improvement of health conditions.
The overall survival rate has increased by 2-3 percentage points compared with last year.
"There is still room for further reduction in breeding costs in the future
.
"

At present, brokerages hold a positive attitude in research reports on the cost control capabilities of Muyuan
.
In the view of Guosen Securities analyst Lu Jiarui, Muyuan shares have obvious advantages in preventing and controlling the epidemic by virtue of the self-reproduction and self-supporting breeding model, with low cost and fast production speed
.
Xie Zhiyou, an analyst at Galaxy Securities, said that Muyuan's loss in the third quarter was smaller than that of its peers, and it relied on its excellent cost control system
.
Cheng Yisheng and Zhao Lin, analysts at Guohai Securities, said that in this round of downturn in the pig cycle, Muyuan has kept breeding costs lower than comparable companies by leveraging its advantages in breeding pig breeding and expansion and rich production management experience, providing it with an advantage to cross the pig cycle.

.

Regarding whether the tens of billions of financing can effectively alleviate the pressure on Muyuan’s funds, what measures will Muyuan take to survive the low pig price and other issues, reporters from the Beijing News have repeatedly called and sent interview outlines to the securities department of Muyuan.
As of press time, No reply yet
.