Shuanghui Development (000895): Hengqiang’s strong future is expected
The integration of the slaughtering industry is accelerating, and the company is expected to give priority to the development of the early slaughtering industry. The reasons for the slow increase in concentration are: 1) the upstream breeding and downstream retailing are highly decentralized; 2) the cost of large-scale slaughter companies is under pressure;.
Thorough environmental protection policies have become stricter, and the supervision over the deterioration of swine fever in Africa has been increased. In the short term, the concentration of the industry has accelerated. However, in the medium to long term, attention must be paid to the progress of industrial chain integration.
Relying on the nationwide production capacity layout and extensive scientific channel network, Shuanghui is expected to give priority to the enhancement of concentration.
The 杭州夜网 strategic reform of meat products releases growth momentum and focuses on low-temperature and Chinese products. Since the “lean extract” incident, the company ‘s continued weakness in meat product growth has been due to the shortcomings of brands, products and channels.
Since 2018, the reform of the strategy for the development of meat products has been successively implemented, gradually moving towards refinement and upgrading, and is expected to release new kinetic energy for development.
With the company’s mature cultivation of low-temperature products, the industrialization of Chinese products continues to advance, and the release of scale and brand effects will become the core incremental source of meat products.
The company’s management and control ability continued to increase, and the impact of fluctuations in pig prices subsequently weakened. From the perspective of slaughtering business, changes in pig prices directly impacted the company’s slaughter volume, which was converted into fresh-sold frozen operations, which ultimately affected profits, but the impact on head profits was reduced.
From the perspective of the meat products business, meat products are not significantly affected by the impact of pig prices, mainly due to the company’s high bargaining power in sales terminals and the cost control ability under the support of the entire industry chain.
Risks indicate food safety risks; the worsening of the African swine fever epidemic; the policy advancement is less than expected; the progress of meat product reform is slow.
With a “Buy” rating, Shuanghui is an absolute leader in the slaughtering and meat products industry. Depending on its scale advantage, its profitability is expected to continue to increase.
Among them, the slaughtering business benefited from the continuous improvement of industry concentration, relying on the nationwide production capacity layout and the extensive scientific sales network to reset the priority; the recovery of meat products business benefited from the endogenous shortcomings of strategic reform, especially low temperature and Chinese productsAfter the cultivation is mature, it will become the core source of growth.
The 2019-2021 EPS is predicted to be 1.
80 yuan, the current price corresponds to 19.
8 times PE, comprehensive absolute and relative estimates, one-year target estimation interval 32.
91 yuan, the first time to recommend a “buy” rating.