Shuanghui Bandung: pig price is expected to fall to 16 yuan / kg by the end of the year

On August 22, Wan Long, chairman of Wanzhou International and chairman of Shuanghui Development, said: In the first half of this year, the domestic pork price dropped from 21 yuan per kilogram to 18.5 yuan, and it is expected that it will continue to drop to 16 yuan by the end of the year.

On August 22, Wanzhou International released its first half of 2016 report, with operating income of 69.4 billion yuan, up 2.4% year-on-year, net profit of 3.6 billion yuan, up 81.8% year-on-year, and plans to distribute cash dividends of 9 yuan (including tax) for every 10 shares to all shareholders, which is the first mid-year high dividend of Wanzhou International. In such a beautiful background, whether Hong Kong as a whole listed Wanzhou International, or domestic Shuanghui development have triggered strong pursuit of securities institutions.

On August 22, Wan Long, chairman of Wanzhou International and chairman of Shuanghui Development, said: In the first half of this year, the domestic pork price dropped from 21 yuan per kilogram to 18.5 yuan, and it is expected that it will continue to drop to 16 yuan by the end of the year. The reasons for the decline in pig prices in the second half of the year include: first, high pig prices will inhibit people's daily consumption, which has occurred at present; second, feed prices are not high, which have fallen compared with 2014 and 2015; third, pig cycle law; fourth, pig prices in Europe and America are relatively low.

What we need to distinguish here is the total global business volume of Wanzhou International, including China, the United States (Smithfield) and other regions, among which the Chinese business is Shuanghui Development. As far as the whole business of Wanzhou International is concerned, it is mainly divided into meat products, fresh pork (slaughtering business), pig breeding and others. Among them, meat products are the core business of Wanzhou International, accounting for 51.1% of its total revenue, while operating profit accounts for more than 91% of its total profit. That is to say, from a global perspective, Wanzhou International relies on meat products to develop, which is very different from the domestic Shuanghui development (Shuanghui development slaughtering business revenue accounts for more than 50% of total revenue).

Although China accounts for only 37% of revenue, net income is roughly the same as that of the United States. The main reason was due to Wanzhou's support for the promotion and activities of meat distributors in China in the first half of 2016. For WH International, the growth of profit margins in China is far greater than in the United States. As the main battlefield in China, pig prices rose sharply in the first half of this year. In addition to cost transfer and strategic stocking, Shuanghui Development also used imported Smithfield pork to reduce costs.

According to statistics, Shuanghui imported pork in the first half of the year was 1.92 billion yuan. According to the average price of 7 yuan/kg, the imported pork volume of Shuanghui was about 130,000 tons. Based on the weight of 110 kg, it is equivalent to 1.2 million pigs. It is estimated that Shuanghui will import 300,000 tons of pork in 2016, which is equivalent to 2.7 million pigs, accounting for 18% of Shuanghui's 15 million slaughtered pigs. From the slaughter volume and inventory volume of domestic Shuanghui development, Shuanghui is indeed compressing the scale of slaughter and inventory under the background of high pig price, so as to reduce the dependence on domestic pig market.

Bandung said that the price of pigs in Europe and America is roughly 7 yuan/kg. In terms of cost, the raw material cost per ton of domestic dried meat is 30,000 yuan, while that in the United States is about 22,000 yuan per ton. The cost per ton can be reduced by 5000 to 8000 yuan. Therefore, increasing meat imports will help the company reduce costs and is expected to import 300,000 tons this year. If Shuanghui imported pork reaches 300,000 tons this year, it can account for almost one-fifth of Shuanghui, and the scale is still relatively large.

Whether the pig price of 16 yuan/kg at the end of this year is accurate remains to be verified, but it can be predicted that Shuanghui will have more obvious advantages in reducing its production cost in the future.