Muyuan Foods Co.,Ltd. (” Muyuan Foods Co.,Ltd. “), in response to the Shenzhen Stock Exchange’s Letter of Inquiry on Muyuan Foods Co.,Ltd. (” Muyuan Foods Co.,Ltd. “), stated that the company received the letter of inquiry on March 15. For the outside question, the original stock gave a reply.
The city has sorted out the core response of Mukhera shares to external questions, as follows:
The proportion of the company’s fixed assets in sales revenue is much higher than that of the same industry
Makiyuan shares reply: compared with the listed companies in the same industry, during the reporting period, the company’s pig breeding adopted the “full autotrophic, full chain, intelligent” breeding mode, while the listed companies in the same industry mostly adopted the replacement breeding mode. Because of the production mode of “company + peasant household”, the surrogate breeding mode has the characteristics of “asset-light”. The fully autotrophic mode requires the company to invest in the construction of pig farms independently. Therefore, compared with the listed companies in the same industry, the company’s fixed assets account for a higher proportion of operating revenue and the fixed assets turnover rate is lower.
In addition, the main business of the company is different from that of listed companies in the same industry. In addition to the pig breeding business, the listed companies in the same industry, Wen’s shares also include broiler chicken breeding, New Hope also includes feed business and poultry breeding, Zhengbang Technology (002157.SZ) and Tianbang Shares (002124) also include feed business, etc. The asset turnover efficiency of these operations is generally higher than that of pig farming.
The ROE of minority shareholders is much lower than that of parent shareholders
Mukhara shares reply: In 2019 and 2020, the first 9 months, the weighted average of the parent company shareholders’ return on equity is higher than the weighted average minority shareholder return on net assets, the main reason is the company and huaneng your sincere trust co., LTD., industrial investment fund in poverty-stricken areas of central enterprises co., LTD., strategic investors, such as a joint venture of subsidiary was established in late 2019, the project investment scale is larger, but the department of molecular construction and production of pig farms and requires a certain amount of time to develop, so lead to rights and interests of minority shareholders is larger profit and loss is low, but the minority shareholder The weighted average return on equity of minority shareholders is lower than the weighted average return on equity of parent shareholders.
Muyuan shares also said that the company does not use minority shareholders profit and loss to adjust the consolidated statement of net profit to the mother of the behavior.
III. A large number of related transactions
Henan Muyuan Construction Engineering Co., Ltd. (hereinafter referred to as “Muyuan Construction”) is mainly to serve the construction needs of Muyuan’s pig farms. It does not take profit as the main purpose, and there is no profit transmission.
It also said that in the past three years and one after another, the proportion of the income generated by the construction projects undertaken by Muyuan Construction to the operating income of Muyuan Construction has been increasing year by year. The main reason is that under the general trend of unbalanced supply and demand structure of the industry and increasing industry concentration, the company has increased its investment in pig production capacity expansion year by year.
Market Note: Muyuan Construction was established in September 2016. It is 100% controlled by Muyuan Group by Qin Yinglin, Qian Ying and his wife, the actual controlling persons of Muyuan shares. In response to the market in 2020, Makihara said that the related business between the company and the related parties is necessary and conducive to the development of the company’s production and business activities. The price of the related transaction is fair and reasonable, and the interests of both parties in the transaction are safeguarded.
IV. Method of depreciation of fixed assets
Mukhara shares reply: the company in the past three years and another period of depreciation of fixed assets in line with the requirements of accounting standards, and has consistency, including two changes in accounting estimates are also in line with the requirements of accounting standards.
V. About high gross profit margin
Mukhara shares reply: in recent year and period, the gross profit margin of the company’s pig breeding business is significantly higher than that of comparable companies in the same industry. The main reason for this situation is that the unit cost of the company’s pigs is lower than that of comparable companies in the same industry. The large difference in unit cost is mainly due to the differences in breeding pig and piglet sources, pig product structure and pig breeding methods between the company and other comparable companies in the same industry.
Interest income is much lower than interest expense
As of September 30, 2020, the monetary fund balance of Muyuan is 22.496 billion yuan, an increase of 105.76% compared with the end of 2019; Short-term loans, long-term loans, non-current liabilities due within one year and bonds payable totaled 27.558 billion yuan, up 225.4% from the end of 2019. Meanwhile, in the first three quarters of 2020, interest expense was 168 million yuan and interest income was 13.848,600 yuan.
Mukhara shares reply: the company’s monetary capital amount is high, the main reasons include: the company in 2020 from January to September the business performance of the substantial growth resulting in the net cash flow generated by operating activities are correspondently large; From January to September 2020, due to the expansion of production scale and construction scale, the average monthly fund gap is large, and to meet the demand of centralized procurement and project payment in the fourth quarter, the net cash flow generated by the financing activities caused by the substantial growth of bank loan scale and other activities in the period from January to September 2020 is correspondently large.
In addition, it said that the size of the company’s interest-bearing liabilities at the end of September 2020 was in line with the size of its revenue, assets, and operating and construction capital expenditures. Since the loan interest rate is much higher than the bank deposit rate, the company has normal fixed assets and operating expenses, and the balance of monetary funds is less than the balance of interest-bearing liabilities, it is reasonable that the interest income of the company is much lower than the interest expense.
On March 17, the first trading day after responding to the doubts, Makihara shares opened up more than 5 percent, putting an end to the gloom of recent declines. In fact, since the weekend Mukhara shares were questioned, in March 15 BBB 0 16 two trading days, Mukhara shares have fallen 5.76%. If counting from the Spring Festival, Mukhara shares fell more than 18 percent in a month ending March 16.
The actual control of the shares of Muyuan is Qin Yinglin, the richest man in Henan Province, and Qian Ying and his wife, who jointly hold 56.23% of the shares of Muyuan through direct and indirect means (as of June 30, 2020). The fortunes of Henan’s richest couple have been on a roller-coaster ride with the recent ups and downs in their share prices.
On March 17, Forbes’ real-time rich list put Qin’s wealth at $31.8 billion.
Mukhara shares performance forecast shows that the net profit attributable to shareholders of listed companies is expected to be 27 billion yuan ~29 billion yuan in 2020, a year-on-year growth of 341.58%~374.29%; After deducting non-recurring gains and losses, the net profit was 30 billion to 32 billion yuan, 387.18% to 419.65% higher than the same period last year.
For the main reasons for the performance changes, Mukhera shares mentioned that in 2020, the company sold 18.115,000 pigs, a year-on-year growth of 76.67%; At the same time, affected by domestic supply and demand, pig prices rose sharply compared with the same period last year. To sum up, the substantial increase in hog sales volume and hog prices in 2020 is the main reason for the substantial increase in operating performance in the same period.