Grinding the bottom. Author: Zhang Hanwen.
Editor: Songgully.
Pig companies struggling at the bottom of the cycle have not seen signs of a reversal in the short term.
On the evening of November 30, New Hope (000876SZ) announced that it intends to issue 136.4 billion shares, raising no more than 73500 million yuan will be used for the security and digital intelligence upgrade of the pig factory, the acquisition of minority shares in the holding subsidiary and the repayment of bank loans.
The day after the announcement, the secondary market reacted violently. New Hope approached the intraday limit and closed at 912 yuan shares, down 88%。
It is worth mentioning that New Hope's peer Huatong Co., Ltd. (002840SZ) on the same day, it announced a revised plan for the private placement, reducing the amount of funds raised by 32.2 billion yuan to 1.6 billion yuan, for pig breeding construction projects, feed processing construction projects and repayment of bank loans. The next day, Huatong shares closed down 074% to 18$69 shares.
In the second half of this year, due to the oversupply and insufficient demand in the industry, the pig market continued to decline, and the pig food ratio remained below 7:1 for a long time, which means that most pig enterprises have borne large losses. In the first three quarters of this year, New Hope posted a net loss of 453.8 billion yuan, Wen's shares (300498SZ) had a net loss of 45900 million yuan.
For New Hope, which has been losing money for two years in a row, or even seeing it losing money for three years in a row, it is even more "tormenting" at the bottom of the cycle. As of the third quarter of this year, New Hope's monetary funds were no longer enough to cover short-term borrowings, and compared with Muyuan shares (002714SZ), Wen's shares and other peers, New Hope's assets and liabilities are also about 10 percentage points higher.
When Tradewind (ID: tradewind01) asked New Hope about the company's financial pressure, the other party said that the company's pig breeding "does not lose cash", and the refinancing is because the company's rolling debt is more, and there is also the purpose of optimizing the equity and debt structure, and the short-term company's asset-liability ratio is more ideal to reduce to 65%.
Refinancing under financial pressure
Although a person related to New Hope told Tradewind (ID: tradewind01), "The market may misunderstand whether we are really short of money, so we must raise funds from the market to 'send' ourselves, but in fact this is not the case." ”
But judging from New Hope's balance sheet, New Hope's cash position is not well-founded.
New Hope's asset-liability ratio is much higher than that of its peers, as of the third quarter of this year, the asset-liability ratio of Wen's shares and Muyuan's shares was 6031% and 5965 percent, while New Hope reaches 7276%。
As of the third quarter of this year, New Hope's total liabilities reached 9699.7 billion yuan, of which 577 are current liabilities6.1 billion yuan, and the total non-current liabilities and short-term borrowings due within one year of current liabilities reached 3155.4 billion yuan.
Compared with Muyuan shares and Wen's shares, New Hope's cash ratio is 021, which is lower than 023, but higher than 019。In terms of current ratio, New Hope has the lowest at 056, Wen's shares and Muyuan shares were 112 and 07。From the perspective of quick ratio, New Hope is higher than Muyuan's shares, but lower than Wen's shares.
Let's look at New Hope's private placement plan: its plan is to issue 136.4 billion shares, raising no more than 73500 million yuan.
Of these, 364.6 billion yuan for pig farm biosecurity prevention and control and digital intelligence upgrade project, the total investment amount of the project is 402.2 billion yuan.
Trade Winds (ID: tradewind01) asked New Hope why this project would use such a large amount of money, and the other party said that the company has more pig farms and more production capacity.
3.6 billion, if the company's current production capacity of 1.6 million sows plus more than 4 million fat pigs, in fact, on average, there is not much. Probably the total amount of money seems to be more now. ”
The second is the acquisition of a minority stake in a holding subsidiary, with a planned investment of 1.5 billion yuan. According to the announcement of New Hope, the two holding subsidiaries are Xu Wen Xinhao Agriculture and Animal Husbandry, hereinafter referred to as "Xu Wen Xinhao") and Shandong New Hope Liuhe Group, hereinafter referred to as "Shandong Liuhe").
Among them, New Hope acquired Xu Wenxin Hao 18The 32% equity plan will invest no more than 500 million yuan, and the counterparty is CCB InvestmentAcquisition of Shandong Liuhe 9The 26% equity is planned to invest no more than 1 billion yuan, and the counterparty is Bank of Communications Investment.
The third purpose of the fundraising is to repay bank debts, which is planned to be used220.4 billion yuan. Trade Winds (ID: tradewind01) learned from people close to New Hope that internal calculations show that if the private placement is completed, New Hope is expected to reduce its debt ratio by 4-5 percentage points.
The inflection point of the pig cycle has not yet appeared
The reality that a pig enterprise is not very happy with is that the current situation of oversupply of pigs in the short term has not yet seen signs of cycle reversal.
Wind data shows that as of November 17, the average price of pork was 2048 yuan kg, still at a historical low, but as of the end of October, the number of fertile sows was 42.1 million, still at a high level. Since the production cycle of breeding sows-piglets-commercial pigs takes about 10-11 months, the industry still has a lot of production capacity to be reduced in the short term.
From the demand side, pork consumption is also less than expected.
According to Yongyi Consulting, the fresh sales rate of pork in the industry has continued to decline since mid-August 2023, and the fresh sales rate has dropped to 90 by November 23, 20238%, reflecting the weak demand for oversupply of live pigs and the poor downstream shipments.
From 2019 to 2020, due to African swine fever, inventory depletion and pig cycle upturn. But now that the temperature is getting cooler again, it is unrealistic to expect swine fever to achieve passive production capacity.
New Hope told Trade Winds (ID: tradewind01) that winter is relatively a high incidence period of swine fever, but the current impact of swine fever on production and breeding is much weaker than that of the previous wild poison era. In the case of weak virulence, the pig will not die immediately, and there will not be much loss if the disease is found to be dealt with immediately. And we have upgraded the means of prevention and control, and now the impact of swine fever on fat pigs will be weakened, but it will affect the pregnancy, conception and fetal death of breeding pigs.
Affecting breeding pigs will only affect the number of pigs slaughtered after 10 months. The person added.
But this also means that there is still pressure on the short-term reduction of industry capacity.
According to the research report of Chen Xueli, an open source analyst, the complete cost of large-scale pig breeding is lower than that of free-range breeding, but the de-industrialization is still slow, mainly due to the fact that cost accounting generally only considers the explicit costs of feed and livestock, while ignoring hidden costs such as artificial depreciation. However, medium and large pig farms cannot ignore the hidden costs, and the cost of medium-sized farms is higher than that of large-scale farms, and the financing capacity is lower than that of large-scale farms, so they are the most vulnerable subjects. In the future, the production capacity will be mainly reduced to medium-sized farms and large-scale farms with poor cost control.
Obviously, if New Hope does not want to become a member of the de-production capacity, the top priority is to ensure a healthy financial turnover to "survive" the pain of the cycle.