Under the cold winter of the industry, huge losses of pig breeding enterprises in 2023 will become increasingly common.
Recently, a number of domestic listed pig companies have successively disclosed their 2023 performance forecasts. On the whole, the net profit attributable to the parent of pig enterprises is generally lost. Among them, a number of leading pig companies are facing billions of losses. Under the continuous operating losses, pig enterprises are also heavily indebted, and the asset-liability ratio is generally more than 60%.
In the past year, the market has significantly accelerated the removal of breeding sows. In the future, how the trend of pig prices will evolve and when the pig cycle will really bottom out are the most concerned issues for the market.
Pig enterprises are mired in the dilemma of "loss", and the debt ratio is rising
The pig industry is obviously cyclical, generally 3-4 years for a cycle. From the beginning of 2019 to the present, this round of pig cycle has lasted for 5 years, and it is still in the bottoming stage.
In this round of pig cycle, pig prices have fluctuated, and the performance of "pig farmers" is like riding a "roller coaster".
In 2021, pork production capacity will significantly exceed consumer demand, resulting in oversupply in the market, pork will continue to be in demand, and many pig companies will lose more than 10 billion yuan. However, since 2022, pork** has gradually bottomed out, and most pork companies have achieved profitability during the year.
However, the good times did not last long, and from the fourth quarter of 2022, pork ** began to turn downward, and in 2023, in addition to a brief bottoming out in the third quarter, domestic pigs ** will mostly show **weak operation at other times.
According to the 2023 operating data disclosed by a number of listed pig companies, the average sales price of most pig companies in December has fallen below 14 yuan kg, and the peak season expectations in the fourth quarter have been disappointed.
Under the cold winter, in 2023, pig farmers will lose a lot of money and struggle. Judging from the announced results, in the first three quarters of 2023, 22 of the 29 listed pig companies in the A-share market are expected to have a loss in net profit attributable to the parent company, accounting for 76%.
Among them, Wen's shares (300498SZ) is expected to have a net profit loss of 6 billion yuan to 6.5 billion yuan in 2023, becoming the "loss king" of the industry.
Even Muyuan shares (002714SZ) is also facing huge losses, with an expected loss of 3.9 billion yuan to 4.7 billion yuan in 2023. As a comparison, in 2022, Muyuan shares will make a profit of 1326.6 billion yuan.
In addition, other pig farmers such as Tianbang Food, Dabeinong, and Shennong Group cannot escape the fate of losses.
It is worth noting that *ST Zhengbang (002157SZ), New Hope (000876SZ) The two pig companies will be profitable in 2023, mainly from non-recurring profit and loss, rather than from the pig business.
A number of pig companies bluntly said in the performance forecast that due to the sharp decline in pig sales year-on-year, the company's pig breeding business profits have suffered deep losses.
In the case of expanding losses, the capital chain of listed pig enterprises is also becoming increasingly tight. In the past few years, listed pig enterprises have achieved substantial expansion through social financing and accumulated a large amount of debt at the high point of pig prices in this cycle.
As of the third quarter of 2023, the scale of liabilities of listed pig companies is already very staggering. For example, the debt scale of Muyuan shares, a "large pig farmer", has exceeded 100 billion, reaching 11306.6 billion yuan. New Hope and Wen's shares also reached 969 respectively9.7 billion and 576$8.1 billion.
As shown in the figure above, the debt ratio of many listed pig enterprises is as high as more than 60%, among them, the debt ratio of *ST Zhengbang is more than 160%. At the same time, most pig companies have a current ratio of less than 1, and the short-term debt repayment pressure is not small.
Many investors are worried that the debt ratio of some pig enterprises is too high, and the cash flow situation is worrying, if the virtuous cycle of debt to capital cannot be realized, these high debts are likely to become the burden of pig enterprises.
For pig enterprises, to survive the bottom of the cycle, survival is the last word. In 2023, leading enterprises such as Muyuan Co., Ltd. and Wen's Co., Ltd. have repeatedly emphasized that the company's core work is to reduce costs, reasonably control cash flow, optimize debt structure, and reduce the level of asset-liability ratio.
Is the inflection point of the pig cycle coming?
Since late January, the Spring Festival stocking has been opened, and there have been signs of live pigs.
According to the data monitoring of Shanghai Ganglian, as of January 31, the mainstream average price of live pigs in the country was 1617 yuan kg, compared to 13 on January 2085 yuan kg, **over 2 yuan kg.
Is this a positive sign from a cyclical perspective?
Some industry insiders said that in the past half a month, East China and Central China have been affected by the early stage of pig disease, and the supply has been phased off, and it coincides with the frequent occurrence of rain, snow and freezing rain in the northern and southern provinces, and the transportation of live pigs has been blocked, and the logistics and transportation resources are tight as the New Year is approaching, resulting in freight rates.
At the same time, it is now at the peak of stocking before the year, driving up consumer demand, and the breeding end is looking forward to a strong sentiment. Stimulated by the superposition of short-term regional supply and demand, pig prices have risen.
It is true that the recent rise in pork ** volatility is mainly due to short-term supply and demand changes before the holiday and the impact of weather factors. However, from a hog supply and demand perspective alone, it is not yet possible to conclude that the cycle is nearing the bottom.
Judging from the inventory of fertile sows, an important indicator of pig **, as of the end of December 2023, the national breeding sow inventory was 41.42 million, a decrease of 04%, which is 101% of the normal stock of 41 million heads, and has been in a row for 12 consecutive months**. In 2023, the cumulative decrease will be 2.48 million heads, a decrease of 57%, which is the lowest number of stocks since 2021.
According to the Ministry of Agriculture and Rural Affairs, from October 2023, the number of newborn piglets in the country has decreased year-on-year, which also indicates that the production capacity reduction has achieved certain results. As the pig production capacity gradually reaches a reasonable level, the pig market situation in the second quarter of 2024 is expected to be better than the same period last year.
Haitong** said,Combined with the current large supply of live pigs, as well as the performance of pig prices before the National Day and New Year's Day in 2023, it is expected that the pig price before the year will be limited, and the industry may continue to lose money. It is expected that the pressure on the supply of live pigs in the next 1-2 quarters will still be large. A bottom inflection point in the pig cycle is expected after the second quarter of 2024.
IFC ** also believes that it will take time for the inflection point of the pig cycle to arrive. Its research report pointed out that in 2023, the pig industry will continue to be sluggish, and the industry's production capacity will show a gradual downward trend throughout the yearAccording to the data of fertile sows, it is expected that the pig cycle is expected to usher in a reversal in the second half of 2024.
Author: Bottle