The country takes action, pig companies expand the brakes, and the "positive ...

Entering 2022, pig companies are gradually posing a more diligent posture

Muyuan shares threw an olive branch to Shuanghui Development, in addition to strengthening the purchase and sale of live pigs, it started annual stock incentives

This figure, for Vice President Yang Ruihua and the head of the Finance Department Gao Tong, is equivalent to a huge sum of more than 7 million "falling from the sky"

In the previous year, the growth rate of the sales volume of live pigs of Muyuan Co.

In the face of the surge in production capacity caused by rapid expansion, the oversupply has accelerated the decline in pig prices, and "reducing costs and increasing efficiency, and reserve funds" has become the key word for the entire pig breeding industry

As a result, the picture of "the overall rapid expansion of the industry from 2019 to 2020" disappeared, and instead, pig companies shifted from attack to defense: from the general direction to adjust the investment rhythm, to the disposal of inefficient sows in the industrial strategy

Pig Enterprise "Lottery"

As the "pig leader", Muyuan shares performed most prominently when the industry was at a low point.

"The company aims to achieve a complete cost of 13 yuan/kg in stages as the goal of cost reduction in 2022.

In terms of performance, Muyuan is also one of the few profitable companies among the listed pig companies.

Bai Wenxi, Chief Economist of IPG China, analyzed that Muyuan's self-propagating and self-supporting asset-heavy model still shows its cost advantage and performance even though the industry price has dropped sharply to below the cost line.

Bai Wenxi said that Muyuan's self-propagating and self-supporting whole industry chain model is an asset-heavy model with a slow expansion rate, but it can effectively control production costs and solve food safety problems, but the industry chain has an spillover effect on farmers.

Muyuan Co.

In order to boost performance, Muyuan shares did not stop breaking out

The announcement shows that the number of restricted shares that Muyuan shares intends to grant is 81.

What does this price mean? The draft incentive plan was released on February 11.

Judging from the specific distribution situation, Vice President Yang Ruihua and Head of Finance Gao Tong were granted the largest number of restricted stocks, both of which were 245,200 shares, equivalent to a huge sum of over 7 million "falling from the sky"; followed by 1992 Wang Chunyan, the chief human resources officer born in 2008, was awarded 196,200 shares, and Li Yanpeng, chief operating officer of pig production, was awarded 147,200 shares

The reason why it is called "restricted stock" means that the stock has a limited sale period, and it is also conditional to lift the restricted sale
.

According to the announcement of Muyuan Co.
, Ltd.
, the performance assessment objectives for the first lifting of the sales restriction period are: based on the sales volume of live pigs in 2021, the growth rate of live pig sales in 2022 shall not be lower than 25%; the performance assessment of the second lifting sales restriction period The goal is: based on the sales volume of live pigs in 2021, the growth rate of live pig sales in 2023 is not less than 40%
.

Judging from the past sales growth rate of Muyuan Co.
, Ltd.
, it is obvious that the above goals are not difficult to achieve
.

From 2019 to 2021, Muyuan Co.
, Ltd.
sold 10.
2533 million, 18.
115 million and 40.
263 million live pigs respectively
.
According to calculations, the growth rate of live pig sales of Muyuan in 2021 will be 122.
26%, and the growth rate of live pig sales in 2020 will be 76.
67%
.

Analysts at China Galaxy Securities believe that the scale of Muyuan's equity incentive plan has been greatly expanded compared with the plan in 2019, fully mobilizing the enthusiasm of core talents, effectively combining the interests of shareholders, the company and the personal interests of operators, and the internal management efficiency is expected to be further improved.
boost
.

Coincidentally, Tang Renshen also announced on February 17 the list of incentive objects awarded for the first time in the 2022 stock option incentive plan
.

The total number of stock options that Tang Renshen intends to grant to incentive objects is 60 million, accounting for about 4.
98% of the company's total share capital; the first grant date of this incentive plan is February 16, 2022, and a total of 857 incentive objects will be granted shares.
There are 54.
906 million options, and the exercise price is 6.
20 yuan per share
.

As of the close on February 15, the stock price of Tangrenshen was 8.
86 yuan per share.
Based on this calculation, it is equivalent to about 170,000 yuan per capita floating profit for the incentivized objects
.

Liu Chang, a global compensation and benefits consultant, said that the core role of equity incentives in listed companies is to provide long-term incentives for core personnel (including core executives and core backbones identified by the company).
The cycle is generally a vesting period of 3 to 4 years.
In the concept of comprehensive compensation, equity incentives cooperate with wages, allowances, performance bonuses, commissions, etc.
to achieve employee retention and incentives, and at the same time bind employees' interests and corporate development, employees have stronger motivation to promote business development, which is why There are attribution conditions set
.
Operating income is the core assessment KPI, but it is not the only one.
In fact, a more diverse assessment method may be more effective; long-term incentives can also reduce the pressure on corporate cash flow, especially for companies with a high proportion of labor costs
.

Retreat and defense after rapid expansion

Over the past year or so, due to overcapacity and other reasons, the price of pigs has entered a downward channel, which has affected the company's performance
.

"Due to the decline in the domestic live pig market price, the company's average single-head sales price was 16.
60 yuan/kg, and the single-head revenue fell by 1,653 yuan.
The increase in sales and the decline in sales prices affected the profit of 8.
873 billion yuan
.
"

Zhengbang Technology's 2021 annual performance forecast blamed the decline on pig prices
.
This year, the predicament faced by all pig companies in China can be summed up as "selling more and earning less"
.

According to the data of Oriental Fortune Choice, as of March 15, 31 of the 37 pork concept stocks have disclosed their 2021 performance forecasts.
Among them, 18 companies have pre-lost, and 9 of the companies that have pre-profits have a growth rate.
slip
.

As a rare company with pre-profit and growth among pork concept stocks, Demei Chemical has already divested its live pig breeding business in 2020, and currently there are only some breeding pig resources left
.

The industry is down, and pig companies have begun to "fancy" self-help, and stock incentives are only one of the ways
.

Cost reduction is the top priority
.
Zhengbang Technology started to eliminate low-efficiency sows in the fourth quarter of 2020 to improve the level of lean production management, and the full cost of the second quarter of 2021 has dropped significantly compared with the first quarter
.

The Beijing News Shell Finance has learned that some pig companies are actively reducing labor costs.
By improving the maturity of intelligent systems and intelligent equipment, they can increase the popularization rate and reduce the dependence of specific production links on personnel
.

Sufficient funds are needed to survive difficult times
.
New Hope has adjusted the pace of investment in 2021, reducing capital expenditure and slowing new investment and development across all breeding farms
.

In addition to throttling costs, it is also necessary to open source and deploy new businesses to allow pig companies to see the feasibility of cross-border
.
Among them, pig companies such as Longda Cuisine, Delis, and Dabeinong have targeted pre-made dishes
.

In response to the downturn in the pig cycle, Longda Cuisine has flexibly adjusted its product structure, and in the second half of 2021, proposed the "one body and two wings" strategy of "focusing on food, with slaughtering and breeding as the two wings", shifting the main development direction to the food sector , made a strategic layout of food preparation dishes and meat products processing
.

Delis also has a lot of "ambition" in the field of prefabricated dishes - the volume of prefabricated dishes in a narrow sense (excluding low-temperature meat products) in 2020 is more than 400 million, and the revenue in 2021 will grow rapidly, and the revenue scale of prefabricated dishes is expected in 2022 About 1.
2 billion yuan
.
At present, the company's prefabricated vegetable production capacity has not been fully released.
It is expected that in 2022, with the expansion of the outlet and the expansion of B-end customer resources, it is more feasible to double the prefabricated vegetable revenue
.

This reality is actually not as expected by the pig companies, and even said that the bet was wrong
.

From 2019 to 2020, at the upward stage of the current pig cycle, the price of pigs has risen.
In order to gain profits and seize the market, the entire pig breeding industry is in a state of rapid expansion.
way to greatly and rapidly increase the production capacity of live pigs
.

At that time, how good the pig companies' vision for the future was, and how refreshing it was when they invested real money to expand production
.

Taking Zhengbang Technology as an example, it promotes production capacity expansion by raising funds through capital market refinancing, and actively self-raises funds to build and lease pig farms in suitable areas
.
Through raising investment projects to reach production and self-raised funds to build or lease the production capacity of pig farms to maintain the rapid growth of live pig slaughter
.

The number of live pigs sold by Zhengbang Technology has rapidly increased from 5.
784 million in 2019 to 14.
9267 million in 2021, with a compound annual growth rate of 61%.
The company's annual slaughter volume has ranked second in the industry
.

Under the high speed, the debt of Zhengbang Technology is high.
As of the end of 2020, the asset-liability ratio of Zhengbang Technology was 58.
56%; in just half a year, it increased by 10.
01% to 68.
57%
.
As of the end of the third quarter of 2021, Zhengbang Technology's monetary capital stock was 6.
070 billion yuan; during the same period, the company's bank credit line was 26 billion yuan, and the unused line was 8 billion yuan
.

In March 2022, Zhengbang Technology announced that it intends to sell all or part of the 8 holding subsidiaries directly or indirectly.
The total asset transaction value of this cooperation is about 2 billion to 2.
5 billion yuan
.
Zhengbang Technology expects to receive an investment income of 1.
1 billion to 1.
9 billion yuan from this transaction, accounting for 19.
15% to 33.
08% of the audited net profit in the latest fiscal year
.

It is not only Zhengbang Technology that sells assets for "blood transfusion"
.
According to Zhang Xiangyun, Secretary of the Board of Directors of Tianbang Co.
, Ltd.
, Tianbang Co.
, Ltd.
has taken a series of measures to ensure cash flow
.
"The sale of the vaccine business has obtained a cash inflow of more than 400 million yuan; the sale of the aquatic feed and pig feed business has obtained a cash inflow of more than one billion yuan, and at the same time, through the cooperation with Tongwei, a certain credit period has been obtained
.
The investment side has also slowed down.
The rhythm has delayed the advancement of some projects
.
”

Independent economist Wang Chikun analyzed that there are pressures on the upstream and downstream of pig enterprises.
The price of live pigs has fallen, which makes it impossible to open source, and the price of live pig feed rises, which makes it impossible to reduce expenditure.
In the case of neither open source nor throttling, pig enterprises can only rely on the sale of assets.
Increase cash flow and ensure the normal development of the main business
.
"

Wang Chikun believes that the rise in raw materials such as live pig feed will force pig companies to reduce the number of live pigs produced, further changing the relationship between pork supply and demand, and will accelerate the appearance of a turning point in the pig cycle
.

Pork supply is still at a high level, and the state takes action to adjust

The pig cycle is an inescapable curse for the industry
.

Because pigs are raised for a longer period of time, pig farming has more obvious and stable cycle characteristics than poultry farming
.
A "pig cycle" is usually 3 to 5 years.
In recent years, due to the gradual increase in the scale of pig farming enterprises and farmers, the ability to maintain during the market downturn has been enhanced, so the length of the pig cycle is also gradually lengthening
.

Since 2006, our country has gone through three complete cycles and is currently going through the fourth one
.

This pig cycle started in 2018.
First, in the first half of the year, due to the capacity expansion of the previous pig cycle, the whole industry encountered the lowest pig price since 2011
.
In the second half of the year, African swine fever broke out in China, and both pig enterprises and farmers suffered losses to varying degrees
.
Under the double pressure of the market and the epidemic, investment in capacity expansion has slowed down, and some companies have stopped expanding
.

In 2019, African swine fever continued.
There are still no relevant vaccines and effective treatment plans in the industry.
Enterprises and small and medium-sized retail investors continue to withdraw.
Among large enterprises, only companies with better biosecurity prevention and control are able to expand, making the industry production capacity.
Significant reduction, the number of live pigs dropped by 27.
5% at the end of the year, and the number of live pigs sold for the whole year fell by 21.
6%
.

In the second half of the year, after the price of live pigs broke through the historical high of 40 yuan/kg, it remained at a relatively high level of more than 30 yuan/kg for a long time
.
Since 2020, on the premise that enterprises have accumulated certain experience in biosafety prevention and control, the large-scale expansion of production capacity has been promoted, and the basic production capacity of the pig industry has been further restored
.

In the first half of 2021, the supply of live pigs continued to rebound significantly.
In the first half of the year, the number of live pigs to slaughter increased by 34% year-on-year, the number of breeding sows at fixed-point monitoring increased by 30% year-on-year, and the number of live pigs increased by 29% year-on-year to 439 million
.
The increase in supply has driven the price to fall sharply.
The price of live pigs has dropped from the high of 36 yuan/kg at the beginning of the year to the lowest point of 12 yuan/kg in June, a drop of more than 60%.
It once fell back to March 2019.
This round of pig cycle began to rise.
previous low
.

According to the monitoring by the Ministry of Agriculture and Rural Affairs, in January this year, the number of live pigs sold across the country increased by 23.
6% year-on-year, and in February this year, the number of live pigs to slaughter increased by 8.
2% year-on-year
.

Chen Guanghua, deputy director of the Animal Husbandry and Veterinary Bureau of the Ministry of Agriculture and Rural Affairs, said that at the end of last year, there were 449 million live pigs in the country, a year-on-year increase of 10.
5%
.
These live pigs will be put on the market one after another in the next six months, that is, from January to June this year
.
Based on this calculation, the pork market supply must be at a high level in the first half of this year
.

Obviously, the enterprise side has long noticed that the industry is currently facing overcapacity
.
Due to changes in market conditions, Aonong Biology, Jinxinnong, Muyuan, Tangrenshen, Tianbang, Wen's, and Zhengbang Technology have all indicated that they have slowed down the pace of investment or construction progress
.

Before the price of pigs rebounded sharply, Wen's Co.
, Ltd.
implemented the strategy of preserving its strength through the difficult period, and adopted the measures of "three controls and one stabilization", namely controlling production capacity, controlling investment, controlling expenditure, and stabilizing production performance; at the same time, it strengthened the internal control management of the enterprise, comprehensively Promote "cost reduction and efficiency increase", and reserve funds to survive the cold winter of the industry
.
Therefore, Wen's Co.
, Ltd.
readjusted the construction plan and pace, reduced large-scale capital expenditure, slowed down the construction progress of some fundraising projects, and the originally expected construction period needed to be extended
.

Zhengbang Technology also chose to stop its expansion.
"In terms of production capacity construction, the construction in progress can be stopped if it can be stopped, and it can be slowed down if it can be slowed down
.
"

On March 15, the National Development and Reform Commission stated that, according to its monitoring, from March 7 to March 11, the national average price ratio of pig grain was 4.
75:1, and it was in the “Improving the Government’s Pork Reserve Adjustment Mechanism to Ensure Pork Market Protection” for three consecutive weeks.
The first-level warning range for excessive decline determined by the Supply and Price Stabilization Work Plan
.
The National Development and Reform Commission will work with relevant departments to start the third batch of central frozen pork reserves this year, and guide all localities to speed up the procurement and storage
.

It is reported that the National Development and Reform Commission will continue to work with relevant departments to do a good job in reserve adjustment, and if necessary, further increase the purchase and storage efforts, promote the return of live pig prices to a reasonable range, and promote the smooth operation of the live pig market
.

The analysis of relevant parties believes that the current domestic production capacity of breeding sows is generally reasonable; the price of live pigs is already at a low level, and the possibility of further sharp decline is small; it is recommended that farms (households) make reasonable arrangements for production and operation decisions, not only to maintain the normal weight of fattening pigs The slaughtering rhythm, not blindly pressing the slaughter, but also maintaining the overall stability of the production capacity of reproductive sows, and not excessively eliminated
.

In addition to purchasing and storing reserves, pig companies have also received a lot of external support in terms of finance
.

According to Wen's shares, the state supports the development of the pig industry, and it is recommended that banks and other institutions not draw or cut off loans to pig companies due to the periodic difficulties in the downturn of the pig cycle
.