Zhengbang Technology (002157): Continuous growth in production capacity

Zhengbang Technology 无锡夜网 (002157): Continuous growth in production capacity

Event: The company released the third quarter report of 2019, and the first three quarters of 2019 achieved revenue of 175.

6.4 billion, a decrease of 0 previously.

12%; net profit attributable to mother is 0.

500 million, an annual increase of 42.

90%.

Realized net profit attributable to mother 3 in Q3 2019.

2.5 billion, an annual increase of 43.

81%.

1. Rising pig prices pushed the profit in the third quarter to be good, and the fourth-quarter performance will continue to grow.

The national hog price continued to rise in 2019Q3. According to data from the Chinese government website, the average national hog price in 2019Q3 was about 23 yuan / kg. Due to the increase in pig prices, the company’s net profit attributable to its mothers in the third quarter was about 3.

2.5 billion. It is estimated that the profit of pigs in the third quarter will be close to 300 yuan per head.

With the continued growth of pig prices in the fourth quarter of 2019, the company’s ability to control biological control has gradually stabilized, and there is limited room for raising breeding costs. Profitability in the fourth quarter is expected to continue to increase.

2. Productive biological assets increased month-on-month, and capacity growth ensured that the volume of listings increased rapidly.

As of the end of the third quarter of 2019, the company’s productive biological assets18.

1.3 billion, an increase of 44.

68%; from the number of breeding pigs, the company’s stock sows increased to 65 at the end of the third quarter.

30,000 heads, an increase of about 200,000 heads compared with the end of the second quarter. The increase in the number of breeding pigs provides a guarantee for the company’s growth in 2020.

From the current breeding stock forecast, considering the impact of ternary backcross, the company’s pig production is expected to be about 8 million by 2020.

Profit forecast: It is estimated that the company’s live pig production in 2019/2020/2021 will be 5.5 million / 8 million / 13 million heads, and the net profit attributable to mothers in 2019/2020/2021 will be 22 respectively.

53/68.

01/98.

8 billion, the corresponding EPS is 0.

92/2.

78/4.

04 with a target price of 27.

80 yuan, give a buy rating.

Risk Warning: 1.

Sudden major epidemic risk: Large-scale epidemics such as African swine fever or avian influenza will occur during the livestock breeding process, which will result in the death of livestock and livestock, distorting the consumer psychology of most people, shrinking market demand, and affecting industries and relatedProfitability of the business.

2.

The price is lower than expected risk: The price of livestock and poultry meat rises or falls more than the cost increase, which affects the profitability of the industry and related companies, and there is a risk that future performance will not continue to grow or even decline.

3.

Raw material price fluctuation risk: The output and price of the main raw materials and agricultural products used by the company’s production and operation are affected by uncontrollable factors such as weather and market conditions. If the price of main raw materials changes in the future, it will affect the profitability of the industry and related companies.
4. Listing of non-pestemic vaccines: The effective listing of non-pestetic vaccines can fundamentally eliminate the spread of non-influenza epidemics, a large number of dechemicalization progress will be disrupted, and pig prices may not rise as expected.