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MarketScreener Homepage  >  Equities  >  Shanghai Stock Exchange  >  Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd.    603609   CNE100001VB7

LIAONING WELLHOPE AGRI-TECH JOINT STOCK CO., LTD.

(603609)
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China's chicken production continues to surge, reducing appetite for imports

08/17/2020 | 04:08am EST

BEIJING, Aug 17 (Reuters) - China's chicken producers are pushing ahead with aggressive expansion plans despite a slump in demand due to the coronavirus, reducing reliance on imports amid recent fears about the safety of foreign meat.

The world's No. 2 poultry producer is expected to produce a record 14.85 million tonnes of chicken meat in 2020, according to the United States Department of Agriculture, a substantial increase over last year's 18% rise to 13.75 million tonnes.

The significant expansion is boosting demand for key feed grains like corn and soybeans, traders in China say, while pushing down poultry prices.

It could also mean smaller purchases of imported frozen chicken just as consumer confidence in imported food takes a hit. Last week, chicken wings from Brazil tested positive for the coronavirus.

"Currently the price is so low. I don't think it's just weak demand but it's also the sufficient supply," said Pan Chenjun, senior analyst at Rabobank.

PORK PUSH

China slaughtered 9.3 billion chickens last year, including 4.4 billion white-feathered broilers, favoured by fast-food chains for cheap, plump meat.

Industry leaders like Liaoning Wellhope Agri-Tech , Yum China KFC-supplier Fujian Sunner Development and Thailand's C.P. already had expansion plans to meet Beijing's goal for more integrated food production.

But some accelerated those projects after profits soared last year alongside the plunge in pork output. With consumers and restaurants seeking substitutes, chicken prices hit record highs.

Wellhope increased chicken production by 36% in 2019, and by a similar pace in the first half of this year, company filings showed.

"We sped up because of the better prices," said Jan Cortenbach, chief technical officer at Wellhope-De Heus Animal Nutrition, a joint venture.

New housing for at least 1 billion more chickens is now in the works, said Walter Benz, president and managing director of China at Big Dutchman Group, a German company that supplies equipment for poultry.

They include a 100 million-bird farm and slaughter project by Shandong Xiantan and two 100 million-bird projects by top Chinese pork processor, the WH Group-owned Henan Shuanghui Investment and Development Co Ltd, due for completion by the end of 2021 and June 2022 respectively.

Shandong Fengxiang Co raised funds in a public share offering last month to finance a doubling of output from 101 million birds.

COVID RISK

The rapid expansion may have been ill-timed, as the COVID-19 epidemic pummelled China's chicken demand. A large portion of chicken meat, cheaper than pork, is consumed in school canteens, which have been shut for much of this year.

Fast-food chains and staff canteens also saw weak demand even after reopening.

Wellhope noted in its earnings report that nationwide, chicken slaughter only increased by 4% in the first half, shrinking 8 percentage points on what had been forecast before the pandemic.

"Now with the downward economic pressure and large imports, supplies are quite big, which is not very optimistic for demand and meat prices," said Qiu Jiahui, deputy president.

Prices could take a further hit as the extra capacity comes online, he added.

Meanwhile, China's hog production appears to be recovering more rapidly than expected.

Wellhope is betting on a long-term shift towards higher chicken consumption among young urbanites with greater concerns about health and convenience.

"Poultry (production and consumption) will increase very fast, as the young generation grows up with new consumption habits," said Qiu.

A sustained period of higher pork prices could also push consumers to permanently put more chicken in their diets, said Pan, the analyst.

Meanwhile, producers are working hard to trim production costs. Those not already using cages are returning to them, Benz said, to maximise space and reduce labour cost and disease risk.

"We have a high operation level, so when we struggle, our competitors struggle even more," Qiu said. ($1 = 6.9440 Chinese yuan renminbi)

(Reporting by Dominique Patton and Hallie Gu. Additional reporting by Beijing Newsroom. Editing by Gerry Doyle)


© Reuters 2020
Stocks mentioned in the article
ChangeLast1st jan.
CORN FUTURES (C) - CBR (FLOOR)/C1 -1.30% 417 End-of-day quote.8.96%
EURO / BRAZILIAN REAL (EUR/BRL) 0.21% 6.2497 Delayed Quote.40.26%
FEEDER CATTLE?FUTURES (GF) - CMG (ELECTRONIC)/C1 -0.21% 139.5 End-of-day quote.-2.43%
FUJIAN SUNNER DEVELOPMENT CO., LTD. 1.00% 27.39 End-of-day quote.13.75%
HENAN SHUANGHUI INVESTMENT & DEVELOPMENT CO.,LTD. 1.24% 48.08 End-of-day quote.65.62%
LIAONING WELLHOPE AGRI-TECH JOINT STOCK CO., LTD. -0.23% 13.2 End-of-day quote.11.58%
LIVE CATTLE (LE) - CMG (ELECTRONIC)/C1 -0.18% 109.4 End-of-day quote.-11.23%
SHANDONG XIANTAN CO., LTD. -0.98% 12.15 End-of-day quote.-21.97%
SOYBEAN MEAL FUTURES (ZM) - CBE (ELECTRONIC)/C1 -1.17% 388.2 End-of-day quote.29.88%
UNITED STATES DOLLAR (B) / CHINESE YUAN IN HONG KONG (USD/CNH) -0.27% 6.5155 Delayed Quote.-6.02%
WH GROUP LIMITED 1.04% 6.77 End-of-day quote.-15.90%
YUM CHINA HOLDINGS, INC. -0.09% 56.76 Delayed Quote.18.33%
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08/17China's chicken production continues to surge, reducing appetite for imports
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2019LIAONING WELLHOPE AGRI-TECH JNT STCO : annual earnings release
2019LIAONING WELLHOPE AGRI-TECH JNT STCO : annual earnings release
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Sales 2020 22 810 M 3 493 M 3 493 M
Net income 2020 1 364 M 209 M 209 M
Net cash 2020 1 554 M 238 M 238 M
P/E ratio 2020 8,61x
Yield 2020 2,53%
Capitalization 11 979 M 1 834 M 1 834 M
EV / Sales 2020 0,46x
EV / Sales 2021 0,35x
Nbr of Employees 5 347
Free-Float 37,2%
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Number of Analysts 4
Average target price 19,57 CNY
Last Close Price 13,20 CNY
Spread / Highest target 79,5%
Spread / Average Target 48,2%
Spread / Lowest Target 21,2%
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NameTitle
Yun Feng Ding President, Chief Executive Officer & Director
Wei Dong Jin Chairman
Zhong Tao Wang Chairman-Supervisory Board
Wen Liang Zhang Chief Financial Officer & Director
Cai Mei Shao Director & Chief Technology Officer