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www.LegiEX.com Official Phone: Brother Zhu will cool down after March

On the last trading day of March 2020, the concept of "Second Brother" took off again. On that day, the closing price of Muyuan's shares soared 6.73%, with a total market value of 269.4 billion yuan, exceeding the market value of security leader Hikvision 260.7 billion yuan, topping the top of the small and medium board .

With the company's market value rising all the way, the founder of Muyuan Qin Yinglin's ranking in China's rich list has also been rising. In the Forbes China Rich List 2019 published in November last year, the Qin Yinglin family ranked among the top ten for the first time, ranking ninth with a wealth value of 117.38 billion yuan, surpassing many Internet, real estate and other industry leaders.

During this new coronary pneumonia epidemic, the global stock market increased in amplitude, and the domestic A-share market also fluctuated greatly. However, during this period, the stock price of Muyuan shares rose sharply, and the market value once exceeded 300 billion yuan, leading Wen's shares by a large margin. faucet. Why is a traditional industry that seems to have a lower barrier to entry a billion-dollar listed company? The editor believes that the main reasons are as follows:

First of all, domestic pig breeding is a trillion-level market, with the potential to cultivate giants. According to data from the National Bureau of Statistics, 540 million live pigs were sold in 2019, a decrease of 150 million head compared to 2018; pork production was 42.55 million tons, a year-on-year decrease of 21.3%.

Even in 2019, when African swine fever has caused a significant decline in hog slaughter, the pork market on the consumer side is roughly estimated at nearly one trillion yuan.

There is huge and rigid market demand, but the supply side is highly fragmented. According to 2018 data from the China Animal Husbandry and Veterinary Yearbook, there are only 407 farmers / farmers with more than 50,000 heads in China. In 2018, the nine largest listed pig breeding enterprises slaughtered live pigs, which accounted for only 6.45% of the total number of live pigs slaughtered in the country that year.

Second, stricter environmental protection policies have gradually removed small-scale farmers from the market.

The promulgation of the Regulations on Pollution Prevention of Livestock and Poultry Scale Farming and the newly revised Environmental Protection Law of the People ’s Republic of China in 2015 have introduced stricter regulations for the hog farming industry. Large-scale hog farming has higher land requirements and impacts on the environment Obviously, due to the increasing pressure of environmental impact assessment, higher requirements have been placed on the location of the farm and the treatment of pollutants. Many pig farms that failed to meet the standards were ordered to close or force demolition within a limited time.

Since the introduction of this policy, the number of capable sows in China has declined significantly, from 41.9 million heads in January 2015 to 20.7 million heads in January 2020, a drop of up to 45.50% (see chart below).

Thirdly, the non-plague epidemic objectively promoted the early end of the industry cycle at the end, and made the industry's supply capacity decline significantly. The environmental protection policy superimposed on the outbreak of African swine fever has reduced the number of sows in the entire hog farming industry, which has led to a decline in the number of pigs slaughtered from 383.79 million at the end of December 2015 to 194.57 million at the end of November 2019.

It can also be seen from the decline in the number of pig stocks in the figure below that since the outbreak of non-plague in 2018, the decline in the number of pig stocks has been very obvious, which has seriously affected the supply capacity of the entire industry. The price of live pigs entered a high range and remained in the second half of 2019.

A trillion-dollar rigid market demand, a sharp reduction in the supply side, stricter environmental protection and higher entry barriers brought by non-disasters have caused the pig cycle law of the pig breeding industry to be temporarily disrupted, and high pork prices have caused the capital market to the entire industry. Expectations change, which also makes the entire industry out of a magnificent market in 2019.

So, why can Muyuan become the leading stock of the entire industry in this round of growth? This has to mention the two typical models of the pig breeding industry, namely the "self-propagating and self-supporting" model and the "company farmer" model.

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