We are a rapidly growing livestock and poultry breeding and farming enterprise in China, focusing on the breeding and farming of pigs and yellow-feathered broilers. With a vertically integrated industry chain covering the breeding and farming of pigs and yellow-feathered broilers and feed production, we are committed to becoming a quality food manufacturing enterprise with full industry chain capabilities in China. Apart from the Self-operated Farm model, we also adopt the Family Farm model, under which we cooperate primarily with individual owners of farms which are Independent Third Parties in our pigs and broiler production. Our results of operation have grown rapidly since our inception, with an increase in the sales volume of our pigs by more than 100 times in the last 10 years. As at 31 May 2023, our business footprint covered 39 cities across 13 provinces and autonomous regions in China. According to the Frost & Sullivan Report, China’s pig market is highly fragmented, with the top three players each accounting for a market share of 7.7%, 2.6% and 1.7%, respectively, in terms of sales volume of pigs for 2022; we ranked sixth among all pig suppliers in China in terms of sales volume of pigs with a market share of 0.8%. According to the same report, for 2022, we ranked third among all yellow-feathered broiler suppliers in China in terms of sales volume of yellow-feathered broilers with a market share of 2.1% while the top player had a market share of 28.2%.
Our business consists of three segments, namely pig, poultry, and ancillary products, which mainly include feed ingredients. Products of our pig segment mainly include market hogs, breeding pigs, market piglets and boar semen. Products of our poultry segment mainly include yellow-feathered broilers and chicks. In addition to breeding and farming of pigs and yellow-feathered broilers at our own facilities, we also cooperate with farm owners in pig and poultry production. For 2020, 2021, 2022 and the five months ended 31 May 2022 and 2023, our pig segment contributed to 70.6%, 72.4%, 78.1%, 75.2% and 78.8% of our total revenue, our poultry segment contributed to 28.1%, 26.4%, 21.4%, 24.3% and 19.9% of our total revenue, and our ancillary products segment contributed to 1.3%, 1.2%, 0.5%, 0.6% and 1.3% of our total revenue, respectively. Our profit/(loss) for the year/period was a net profit of RMB3,608.4 million, a net loss of RMB3,172.7 million, a net profit of RMB909.8 million and a net loss of RMB1,548.6 million and a net loss of RMB2,184.5 million for 2020, 2021 and 2022, and for the five months ended 31 May 2022 and 2023, respectively. We currently expect we will incur significant net loss in 2023, primarily as a result of the low market price of market hogs during the period from January to September 2023.
Our farming business models Our pig farming is conducted under the No. 2 Family Farm, No. 1 Family Farm and Self-operated Farm models:
‧ No. 2 Family Farm model. It is a model under which we cooperate with farm owners to raise sows, and to produce weaned piglets that are fattened either in the No. 2 Family Farm or nearby No. 1 Family Farms. For 2020, 2021, 2022 and the five months ended 31 May 2022 and 2023, revenue generated from the sales of pigs raised under the No. 2 Family Farm model amounted to RMB1,596.6 million, RMB1,478.7 million, RMB1,763.1 million, RMB500.9 million and RMB760.1 million which accounted for 27.8%, 20.6%, 15.0%, 14.5% and 15.2% of our total revenue from the sales of pigs, respectively.
‧ No. 1 Family Farm model. It is a model under which farm owners fatten our weaned piglets. For 2020, 2021, 2022 and the five months ended 31 May 2022 and 2023, revenue generated from the sales of pigs raised under the No. 1 Family Farm model amounted to RMB3,626.1 million, RMB3,935.0 million, RMB8,064.7 million, RMB2,281.2 million and RMB3,464.3 million, which accounted for 63.1%, 54.9%, 68.7%, 66.3% and 69.0% of our total revenue from the sales of pigs, respectively.
‧ Self-operated Farm model. It is a model under which we build the farm and employ labour force to carry out scaled breeding, fattening and other related process. This model has the advantage of high level of centralisation and standardisation, which allows us to implement an efficient management system. For 2020, 2021, 2022 and the five months ended 31 May 2022 and 2023, revenue generated from the sales of pigs raised under the Self-operated Farm model amounted to RMB525.0 million, RMB1,754.4 million, RMB1,917.2 million, RMB661.5 million and RMB789.9 million, which accounted for 9.1%, 24.5%, 16.3%, 19.2% and 15.8% of our total revenue from the sales of pigs, respectively.
We breed and select chicken breeders, and hatch fertile eggs in our own poultry farms and hatcheries. For broiler farming, we adopt the Poultry Family Farm model and Poultry Farming Base model:
‧ Poultry Family Farm model. It is a model under which family farms provide the land and facilities and raise the yellow-feathered broilers according to our standards, while we provide chicks, feed, medicines and technical support. For 2020, 2021, 2022 and the five months ended 31 May 2022 and 2023, revenue generated from the sales of yellow-feathered broilers raised under the Poultry Family Farm model amounted to RMB2,074.0 million, RMB2,419.0 million, RMB3,028.7 million, RMB1,049.8 million and RMB1,176.0 million, which accounted for 95.9%, 96.0%, 97.3%, 97.2% and 95.5% of our total revenue from the sales of yellow-feathered broilers for the same periods, respectively.
‧ Poultry Farming Base model. It is a model under which we build facilities by ourselves and lease the land and facilities to farm owners while the farm owners raise the yellow-feathered broilers. For 2020, 2021, 2022 and the five months ended 31 May 2022 and 2023, revenue generated from the sale of yellow-feathered broilers raised under the Poultry Farming Base model amounted to RMB50.7 million, RMB51.9 million, RMB28.4 million, RMB9.4 million and RMB34.2 million which accounted for 2.0%, 1.8%, 0.9%, 0.9% and 2.8% of the total revenue from the sales of yellow-feathered broilers for the same periods, respectively.
Contract Farming
We cooperate with a wide base of farm owners to produce pigs and poultries under our family farm models. For 2020, 2021, 2022 and the five months ended 31 May 2022 and 2023, revenue from the sale of pigs and yellow-feathered broilers raised under the family farm models amounted to RMB7,347.4 million, RMB7,884.6 million, RMB12,884.9 million, RMB3,841.3 million and RMB5,434.6 million, representing 90.2%, 79.6%, 85.7%, 83.8% and 85.4% of our total revenue during the same periods, respectively. For details, please refer to the section headed “Business – Production – Contract Farming” in this document.
We have advanced R&D capabilities in China, and we were the only breeding and farming enterprise in China that had two national key leading enterprises in agricultural industrialisation (農業產業化國家重點龍頭企業) and two national-level core pig breeding farms (國家級生豬核心育種場) as at 31 December 2022 according to the Frost & Sullivan Report. As at the Latest Practicable Date, we have established the Key Laboratory for Poultry Genetics and Breeding of the Ministry of Agriculture (農業部家禽遺傳育種重點實驗室), the Leading Enterprise Technology Innovation Centre of the National Spark Programme (國家星 火計劃龍頭企業技術創新中心), two national-level core pig breeding farms, the National Huiyang Bearded Chicken Breeding Farm, the “Guangdong Biological Germplasm Resource Bank – Domestic Livestock & Poultry Germplasm Resource Bank” (廣東省生物種質資源庫 – 畜禽種質資源庫) and was selected as one of the National Livestock and Poultry Agriculture Constituent Enterprises (國家畜禽種業陣型企業). We have also cooperated with research institutions to build a number of national and ministerial breeding platforms and key laboratories, including the National Pig Technology Innovation Centre – Breeding R&D Centre (國家生豬技術創新中心 – 養殖研發中心). In recent years, by leveraging our strong R&D capabilities, advanced genetic resources and breeding system, we have conducted more than 50 national, provincial and ministerial R&D projects, including multiple National High-tech R&D Programs of China (863 Programme).
Source: Dekon Food and Agr (02419) Prospectus (IPO Date : 2023/11/27) |