In September last year, I wrote an article about the official launch of a new round of pig cycle. How did you derive it? , After a year or so, during the period, pig stocks have risen significantly stronger than the broader market, and the range has been high and low. In the middle of the year, there was a wave of decline in April-May, and the magnitude was more obvious. start to fall. Now the market is quite divided, let me talk about my personal views.
The market has a view that the opportunity for the pig cycle is over, and the highs in March and July this year formed a top, and the risks behind are very high, and there is no chance.
My view is that there is still a chance for a pig cycle, not a peak and end of the cycle in the general sense.
If it is a general cycle peak, it means that the subsequent decline will continue, the magnitude will be large, and the time will be very long. The large margin means that it will drop a lot from the high point in July. According to the past situation, it will drop by at least 50%. However, many stocks, such as Xinwufeng, Tiankang Bio, Tangrenshen, Jinxinnong, Muyuan, and New Hope Wait, it will even fall below last year’s low, but these stocks generally have growth potential, and the number of slaughtering has increased significantly. As long as the company does not go bankrupt, there is no reason to be lower than the bottom of the previous round. We can observe the history of Tianbang Foods, Zhengbang Technology, and New Hope. These are all bad losses in this cycle, but the slaughter has increased significantly, and their bottom has been rising.
It will be a long time, meaning that starting in July, there will be no chance until the bottom of the next cycle. When will the next round of pigs enter the cycle trough again? Almost impossible next year. Because it just reversed this year, according to historical experience, the total profit time will be about 2 years. Now it has just been eliminated for 4-5 months, and it has just been profitable for 3 months. Next year, it will enter the stage of overcapacity again? It is unlikely, and now the price of sows is very low, and the price of pigs is rising. The price of sows is falling, which shows that everyone is really cautious . This is actually understandable. Who would dare to do it immediately after taking a life from the IUC. ? When listening to Muyuan’s minutes, Qin Jun also said that the loss was so bad just now, the debt ratio was so high, and the rapid expansion was imminent, which was inappropriate from the point of view of business operation.
Then the cycle trough is probably 24-25 years. This means that there is no chance for pig stocks in the intervening two years? You know, now in the bottom range of the broader market, will the market rally drive sentiment? Will there be some surprises in the price of pigs next year, for example, the economy is picking up, consumption is increasing, the stock market is cautious, and the price of pigs is better than expected? Or is there a turnaround in Russia and Ukraine? Food prices have a turnaround, etc.? More importantly, most of the stocks had a limited increase, but now they have fallen back. From the bottom of last year, many stocks have generally only increased by 20-30% or even less. Let’s assume that the stock price will fall and will soon reach the bottom of the valuation, and then what will we do in two years?
We think from a very conservative perspective, from the bottom of the stock. Most pig stocks have limited downward space. The further down we go, the closer we are to the bottom of the valuation. If we know where the bottom is, it will be easy to handle and have confidence. .
What will happen to the pig stock in the back?
First of all, the market has been down for a year and a half, which is a long time. In addition, the valuation is already very low, and it is not far from bottoming out. In addition, the economy is not good this year, and there is a high probability that it will improve next year. It will increase, and it may even usher in a new bull market. So regardless of whether the speculation exceeds the pig cycle, if the valuation of pig stocks is not high, it is easy to rise a lot if the market’s rising sentiment is only improved.
Second, the pig stock has just made a profit for three months, and the report still has no response. There will be a long period of profitability and a substantial increase in performance, and it will take time to turn losses into profits. If the valuations of all pig stocks are particularly high now, such as in July 2020, then one should be careful about the positive release of such performance at this time. But now the position of pig stocks is very low, similar to February 2020, and even lower, then with the release of the market and performance, the stock price is prone to a wave similar to February-July 2020.
In conclusion, low valuations are important, as are market sentiment and the broader market. This year, the average market capitalization of most pig stocks cannot be raised. The main reason is that the overall market sentiment is very weak. Therefore, the average market capitalization of the pig stocks is now at a very low position. If the market plays a role, if the average market capitalization is raised to 5,000, most stocks are also potential. Not small.
Summarize:
The market is very poor, dragging down the performance of pig stocks. Pig stocks are cyclical, and the data from all parties is inconsistent, especially the Ministry of Agriculture and Rural Affairs, which is prone to various disagreements, so the stock price fluctuates up and down.
Because valuations are low and downside risk is limited, last year’s bottom can serve as a reference point. In the future, pig stocks will at least have their performance realized, in line with a wave of market conditions.
The specific performance of the latter wave of the market depends on the environment of the broader market . If there is a strong reversal of the market in the next few months, then the pig stocks are just at the high price of pigs again, and the logic of pushing up will be very smooth. Then the pig is likely to have a major upswing when its performance is released and become the leading sector.
The second is the future performance of pig prices. Of course, the stronger the pig price, the better. It is currently 24+, and the price of pigs will not be bad until January next year, but it is hard to say what the specific price will be. According to the estimates of some institutions, consumption will increase by 15%+ by then, and we know that March this year will be the least productive, corresponding to around January, and secondary fattening can increase supply by about 8%-10%, so compared to now It is said that there will be a supply gap of about 5-10%, which will have a great impact on things like pigs. I hope that the price of pigs can go up to 26+ and 28 is the best.
The smooth situation is that in the next four months, the market bottomed out and there was a better market. Because from this position, it is difficult for the broader market to fall unilaterally for another 4 months. Once it bottoms out and the broader market is particularly strong, it is the best. At the same time, if the price of pigs is also strong at that time. The whole wave of performance releases will perform well, and pig stocks have a good chance to become a mainstream hot spot.
If it doesn’t go well, there is no strong trend between the market and January next year. The pig stocks will depend on the price of pigs. If they are strong and exceed expectations, there is still a high probability that many pig stocks will exceed the high point in March and July. Not sure if it can be doubled. If the price of pigs is also average, for example, 25 will not be able to go up, then this wave of many pig stocks may be fluctuations such as from the low point of this wave of adjustment and then back to the previous high. The follow-up is unpredictable.
From about January next year, the situation will be more complicated, and it is difficult to predict now.
Operationally, the existing pig stock positions will continue to be held. The reason for animal husbandry is that the cost is really excellent, and it can be taken longer to see the stock price performance. As the production capacity continues to expand to 100 million+ in the future, the full-cycle profit will be 35 billion+ and it will be a cash cow. Other pig stocks such as Xinwufeng, Tangrenshen, Tiankang Bio, etc. will fall later. If they fall relatively cheaply, they will add some positions, because the downward space is small, and there are various possibilities for the upward . There is always a feeling that it is necessary to buy cheap when starting out, and cheap can deal with many situations. And if you buy it just because you think the stock price is going to go up, you may lose a lot if it goes wrong.
After Xin Ng Fung acquires Tianxin, there will be a sharp increase in the number of slaughtering companies. At present, the modern agricultural group has introduced a completed production capacity of about 6.5 million. The group’s long-term goal is 10 million. It is the boss of Hubei, which has growth potential. As a state-owned enterprise, the safety is also Better.
At this stage, Tiankang Biology has a planned slaughter target of 5 million. Feed, animal protection, all have growth potential, and other larger plans have not yet been seen. In addition, feed animal insurance is a post-cycle. Even if it is expected that the number of pigs will start to increase, the post-cycle stocks may still have additional momentum. And according to research, the complete cost in the second quarter has dropped below 17, which is a good cost.
Tang Renshen’s long-term goals in the future are 10 million pigs, 10 million tons of feed, 3 million tons of meat products, and a profit of 3 billion yuan. It is very good to have a long-term goal. It is hard to say how the specific realization will be, but in the long-term, it is not like Zhengbang. In that way, if the high level is too aggressive, it will not be a big problem for the slaughter to continue to increase in the future. In a longer period of time, the stock price will have a relatively good upward slope. In addition, the Longhua Agriculture and Animal Husbandry Association accounts for about 40% of the slaughter, and the cost of Longhua is relatively good, which is a bright spot.
In general, pigs must have a relatively clear growth goal, and have cost advantages to support growth. Otherwise, if there is no growth potential, pure cyclical stocks, it will be very laborious to do, and the money will not be easy to make. Even if it rises a lot later, it may be difficult to sell early in the middle of whether the cycle is over or not.
$Muyuan Shares(SZ002714)$ $Tangrenshen(SZ002567)$ $Xinwufeng(SH600975)$ Superstar Agriculture, Animal Husbandry and Gold Xinnong Aonong Biology
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