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March 2018

China Broiler Industry Research and

Investment Analysis Report in 2017/2018

China Broiler Industry Research and Investment Analysis Report in 2017/18

Address: Room 905, Golden Tower. No.1 Xibahe South Road, ChaoYang District, Beijing PRC

Tel: 86-10-64402118 Fax: 86-10-64402039 E-mail: [email protected] Web: www.cnagri.com

I

Industry Background

Based on continuous accumulation of data, persistent tracking on industrial changes and in-

depth researches for more than 20 years, BOABC will provide you with a valuable analysis

report on broiler industry and investment.

(1) The prosperity of white broiler industry declines, and breeder link suffers heavy

losses in 2017.

Affected by H7N9 epidemic situation, terminal market consumption and national

environmental protection policy, the prices of white broiler and relevant products fluctuate

sharply in 2017, raising link keeps profitable benefiting from the decline in feed prices, but

breeder link suffers heavy losses. From the perspective of the performances of enterprises in

2017, MINHE and Yisheng respectively suffered losses of 280 million yuan and 330 million

yuan; the net profit of Sunner Development and Xiantan respectively was 310 million yuan

and 190 million yuan, decreasing 54% and 59% from the same period last year.

(2) The degree of scale raising of white broiler continues to rise, and the concentration

rate of slaughtering enterprises is high.

With the rising of labor cost, the increase of environmental protection requirements and the

changes in consumption mode, the degree of scale raising of broilers further increases, and

the slaughter of standardized farms with annual production of more than 100,000 birds

account for about 40% of the total national slaughter in 2017. Broiler industry is the most

matured industry with highest organization and scale degree in China’s animal husbandry, and

has many large-scale enterprises, and top ten enterprises totally contribute to more than half

of slaughtering volume of white broilers.

(3) White broiler enterprises successively increase investment in terminal.

White broiler capacity has limited growth space, and new increased infrastructure investment

projects are less. Large-scale enterprises successively increase investment in terminal and




II

invest food processing and central kitchen projects. Sunner Development Group extends

industrial chain to terminal consumption market and expands food and catering businesses

which mainly include several first-level subsidiaries such as Sunner Food, Risheng Food,

Fengsheng Vegetable, Lemeilong Catering Management, etc., and their businesses cover

chicken food deep processing, catering chain store, bean products processing and others. CP

Group invests 1.7 billion yuan in Yiwu to build central kitchen with a daily production scale of

500,000 special packed meals and meat products deep processing project with annual

production capacity of 90,000 tons meat products.

(4) Yellow broiler raising suffered heavy losses in the first half of 2017, and the situation

turned better somewhat in the second half of 2017; enterprises speed up expansion of

iced fresh chicken market.

Under the influence of many factors such as H7N9 in the first half of 2017, the distribution

channel of live poultry was blocked across the country, and yellow broiler industry suffered

heavy losses. According to primary estimates, yellow broiler raising industry suffered a loss of

more than 5 billion yuan in the first half of 2017, which made the whole industry faced with

development crisis.

In the longer-term, yellow broiler enterprises should change profit model, perfect whole-course

cold chain control and broaden marketing channel. As a leading enterprise in yellow broiler

industry, WENS Group gradually makes transformation to a whole industrial chain business

integrating production, slaughtering, deep processing and selling by investing in poultry

slaughtering projects.

The report will make in-depth research on the development trend of domestic broiler industry

and the operation models of major enterprises and conclude the investment trends of domestic

enterprises and capital to assist enterprises, capital and insiders to grasp the moving tendency

and investment opportunities and determine suitable development mode and resources

needing integration.




III

Table of Content

PART ONE ANALYSIS AND FORECAST OF GLOBAL BROILER MARKET .......... 1

1.1 CHANGES IN GLOBAL BROILER PRODUCTION AND REGIONAL

DISTRIBUTION: SLOWDOWN IN PRODUCTION AND HIGH CONCENTRATION

RATIO OF PRODUCTION ......................................................................................... 1

1.1.1 Position of Chicken in Meats ................................................................................. 1

1.1.2 Growth in Global chicken production Slowed Down ........................................... 1

1.1.3 Higher Concentration Ratio of Global Chicken Production ................................. 2

1.1.4 Forecast on Future Chicken Production Changes ............................................... 3

1.2 IMPORT AND EXPORT TRADE OF GLOBAL CHICKEN: BRAZIL AND THE

US DOMINATE EXPORT MARKET .......................................................................... 3

1.2.1 Global Chicken Exports Continued to Grow ......................................................... 3

1.2.2 High Concentration of Chicken Exporters ............................................................ 4

1.2.3 Chicken Importing Countries Were Relatively Decentralized .............................. 5

1.2.4 Forecast on Changes in Future Chicken Import and Export Trade ..................... 6

1.3 GLOBAL CHICKEN CONSUMPTION: SLOW GROWTH ................................... 6

1.3.1 The US, China and the EU Are the World’s Largest Chicken Consumers .......... 6

1.3.2 Global Chicken Consumption Grew Slowly .......................................................... 7

1.4 INTERNATIONAL COMPARISON OF WHITE BROILER INDUSTRY ................ 8

1.4.1 The Costs of Broiler Farming in China were about 30% Higher Than That in the

US and Brazil ................................................................................................................... 8

1.4.2 The Concentration of Broiler Companies in the US and Brazil Was Much Higher

Than That in China .......................................................................................................... 8

1.4.3 Great Differences of Industry Development Model and Farming Scale of

Enterprises among the US, Brazil and China .............................................................. 10

1.5 INTERNATIONAL LARGE-SCALE BROILER ENTERPRISE: TYSON ............ 11

PART TWO ANALYSIS AND FORECAST OF CHINA’S BROILER INDUSTRY ..... 13

2.1 CHINA’S CHICKEN PRODUCTION DECREASED MORE THAN 6% IN 2017 . 13

2.1.1 The Slaughter of White Broiler and Yellow Broiler Respectively Was About 4.0

Billion Birds ................................................................................................................... 13

2.1.2 The Proportion of Standardized Farming of Broilers Continued to Rise .......... 14




IV

2.2 CHINA CHICKEN CONSUMPTION ................................................................... 16

2.2.1 China Chicken Consumption Accounted for about 14% of Meat Consumption

........................................................................................................................................ 16

2.2.2 Low Per Capita Chicken Consumption with Great Growth Potential ................ 17

2.2.3 Consumption Channels Were Dominated by Outdoor Consumption and

Household Consumption .............................................................................................. 17

2.3 CHINA’S CHICKEN TRADE .............................................................................. 18

2.3.1 Anti-dumping and Other Policies......................................................................... 18

2.3.2 Decrease in Import Volume and Increase in Import Price .................................. 20

2.3.3 Chicken and Entrails Imported from Brazil Accounted for 85% of the Total

Import Volume ................................................................................................................ 21

2.3.4 Cumulative Import Volume of Top 10 Chicken Importing Companies Accounted

for 45.32% of China’s Total Imports of Chicken and Entrails ..................................... 21

2.4 CHICKEN EXPORT IN CHINA .......................................................................... 22

2.4.1 Export Policies ...................................................................................................... 22

2.4.2 Slight Growth in Export Volume and Small Decrease in Export Price .............. 23

2.4.3 Entire Chicken (fresh or chilled) and Other Frozen Chicken Pieces Are the Main

Products of Exports in China ....................................................................................... 23

2.4.4 Hong Kong Was the Largest Export Destination of Chicken and Entrails

Originating in the mainland of China ........................................................................... 24

2.4.5 The Export Volume of TOP10 Companies Accounted for 51.32% of Total

Chicken Exports of the Mainland of China .................................................................. 24

2.5 CHINA CHICKEN SUPPLY AND DEMAND BALANCE SHEET ....................... 25

PART THREE ANALYSIS OF CHINA’S WHITE BROILER INDUSTRIAL CHAIN .. 27

3.1 BREEDER RAISING LINK: SURPLUS CAPACITY AND SERIOUS LOSSES . 27

3.1.1 Policies and Regulations...................................................................................... 27

3.1.2 The Introduction of GP Breeders Decreased for 4 Consecutive Years ............. 28

3.1.3 Inventory of (GP and Parental breeders) Basically Remained at the Level of

Previous Year ................................................................................................................. 29

3.1.4 The Farming of GP breeders Broke Even, While the Rearing of Commercial

Broilers Suffered Heavy Losses ................................................................................... 30

3.1.5 High Concentration (GP and Parental) ................................................................ 31

3.1.6 Development Trend............................................................................................... 32




V

3.2 BROILER RAISING LINK: SLAUGHTER DECLINES AND BROILER RAISING

MAINTAINS PROFITABLE ...................................................................................... 33


3.2.2 A Decrease of 4.5% in Slaughter .......................................................................... 33

3.2.3 Profit of Raising White Broilers Averaged RMB0.95/Bird .................................. 35

3.2.4 High Concentration............................................................................................... 36

3.2.5 Farming Modes Are Varied with “Company + Farmer” Model Accounting for

45% ................................................................................................................................. 37


3.3 BROILER SLAUGHTERING AND PROCESSING LINK: DECREASING

OPERATION RATE AND LOW PROFIT .................................................................. 37


3.3.2 Slaughtering Capacity and Distribution .............................................................. 38

3.3.3 The Profit of Slaughtering White Broiler Was 0.2yuna/bird, down 0.15yuan/bird

from the year before ...................................................................................................... 38

3.3.4 Slaughtering Capacity of Enterprises with Annual Capacity of over 10 Million

Birds Accounted for Nearly 71% of National Broiler Slaughter .................................. 39


3.4 CIRCULATION LINK OF CHICKEN: WHOLESALE MARKET WAS THE MAIN

BODY OF CIRCULATION ........................................................................................ 40


3.4.2 As the Main Channel, Wholesale Market Accounted for 52% of the Total

Circulation of Chicken ................................................................................................... 40

3.4.3 Market Size and Profit .......................................................................................... 41


PART FOUR ANALYSIS OF CHINA’S YELLOW BROILER INDUSTRIAL CHAIN 42

4.1 BREEDER RAISING LINK ................................................................................ 42

4.1.1 Inventory (GP and parental breeders) Will Continue to Decrease Slightly ....... 42

4.1.2 High Concentration (GP Breeders and Parental Breeders) ............................... 42


4.2 BROILER RAISING LINK: SLAUGHTER DECLINED ...................................... 44

4.2.1 Decrease in Slaughter .......................................................................................... 44

4.2.2 Market Size, Cost and Profit ................................................................................. 45




VI

4.2.3 Lower Concentration ............................................................................................ 46


4.3 BROILER SLAUGHTERING AND PROCESSING LINK: OPERATION RATE

INCREASES SIGNIFICANTLY ................................................................................ 49

4.3.1 Slaughtering Capacity and Regional distribution ............................................... 49


4.3.3 Concentration Ratio .............................................................................................. 49


4.4 CIRCULATION LINK OF CHICKEN: FARM PRODUCE FAIR WAS THE MAIN

BODY OF CIRCULATION ........................................................................................ 50


4.4.2 Circulation Channel .............................................................................................. 51



PART FIVE ANALYSIS OF CHINA’S KEY BROILER ENTERPRISES ................... 53

5.1 WENS GROUP .................................................................................................. 53

5.1.1 Basic Profile .......................................................................................................... 53

5.1.2 Business Model .................................................................................................... 54

5.1.3 Key Competitive Factors ...................................................................................... 55

5.1.4 Investment Trend .................................................................................................. 56

5.1.5 Analysis of Operation Situation ........................................................................... 57

5.2 NEW HOPE LIUHE ............................................................................................ 59

5.2.1 Basic Profile .......................................................................................................... 59

5.2.2 Business model .................................................................................................... 60




5.3 SUNNER DEVELOPMENT ................................................................................ 63

5.3.1 Basic Profile .......................................................................................................... 63

5.3.2 Business Model .................................................................................................... 64






VII


5.4 WELLHOPE ....................................................................................................... 67

5.4.1 Basic profile .......................................................................................................... 67

5.4.2 Business model .................................................................................................... 69




5.5 SHANDONG YISHENG LIVESTOCK AND POULTRY BREEDING CO., LTD. . 72

5.5.1 Basic Profile .......................................................................................................... 72

5.5.2 Business Model .................................................................................................... 73




5.6 SHANDONG MINHE ANIMAL HUSBANDRY CO., LTD. .................................. 76

5.6.1 Basic Profile .......................................................................................................... 76

5.6.2 Business Model .................................................................................................... 78




5.7 XIANTAN CO., LTD............................................................................................ 80

5.7.1 Basic Profile .......................................................................................................... 80

5.7.2 Business Model .................................................................................................... 82


5.7.4 Analysis of Operating Conditions ........................................................................ 83

5.8 DADI ANIMAL HUSBANDRY ............................................................................ 84

5.8.1 Basic profile .......................................................................................................... 84

5.8.2 Business Model .................................................................................................... 84



5.8.5 Analysis of operation situation ............................................................................ 86

5.9 HEBEI MEIKEDUO FOODS GROUP ................................................................ 86

5.9.1 Basic profile .......................................................................................................... 86




VIII

5.9.2 Business Model .................................................................................................... 87



5.10 XIANGJIA ANIMAL HUSBANDRY .................................................................. 88

5.10.1 Basic profile ........................................................................................................ 88

5.10.2 Business Model .................................................................................................. 90

5.10.3 Key Competitive Factors .................................................................................... 90

5.10.4 Investment Trend ................................................................................................ 91

5.10.5 Analysis of Operation Situation ......................................................................... 92

5.11 GUANGXI CHUNMAO INVESTMENT CO., LTD. ............................................ 92

5.11.1 Basic profile ........................................................................................................ 92

5.11.2 Business Model ................................................................................................... 94


5.11.4 Investment Trend ................................................................................................ 96

5.11.5 Analysis of Operation Situation ......................................................................... 96

5.12 CHUANWEI CHICKEN .................................................................................... 97

5.12.1 Basic profile ........................................................................................................ 97

5.12.2 Business Model .................................................................................................. 98


5.12.4 Investment trend ................................................................................................. 99

5.12.5 Analysis of operation situation ........................................................................ 100

PART SIX ANALYSIS OF INVESTMENT IN CHINA’S BROILER INDUSTRY ...... 101

6.1 COMPREHENSIVE ANALYSIS OF INVESTMENT PROJECTS IN CHINA’S

BROILER INDUSTRY IN 2017 .............................................................................. 101

6.2 ANALYSIS OF INVESTMENT PROSPECT OF CHINA’S BROILER

INDUSTRIAL CHAIN ............................................................................................. 105




IX

List of Figures

Figure 1.1 Global Chicken Production, 2010-2017 ......................................................................... 2

Figure 1.2 Chicken productions of global main producing countries............................................ 3

Figure 1.3 Global Chicken Export Volume ....................................................................................... 4

Figure 1.4 Global Chicken Export Distribution, 2017 ...................................................................... 4

Figure 1.5 Change Trends in Export Volume of Major Exporting Countries in the World, 2010-

2017 ....................................................................................................................................................... 5

Figure 1.6 Global Chicken Import Distribution, 2017 ...................................................................... 5

Figure 1.7 Changes in Chicken Consumption in Different Countries and Regions, 2010-2017

................................................................................................................................................................ 7

Figure1.8, Global Chicken Consumption, 2010-2017..................................................................... 7

Figure1.9 Concentration of Top 4 Broiler Enterprises in Brazil ..................................................... 9

Figure1.10 Concentration of Top 6 Broiler Enterprises in the US ................................................. 9

Figure1.11 Concentration of Top 10 Broiler Enterprises in China ...............................................10

Figure 2.1 Changes in Broiler Slaughter and Chicken Supply in China ....................................14

Figure2.2 Broiler Slaughter Structure in China ..............................................................................14

Figure2.3 Scale Structure of Broiler Farming in China .................................................................15

Figure2.4 Degree of Standardized Scale Farming of Broilers in China .....................................15

Figure2.5 Consumption Proportions of Various Meats in China .................................................16

Figure2.6 Changes in Per Capita Chicken Consumption in China and other Major Countries

..............................................................................................................................................................17

Figure2.7 Chicken Consumption Structure in China .....................................................................18

Figure2.8 Import Volume and Import Price of Chicken Products in China ................................20

Figure2.9 Export Volume and Export Price of China’s Chicken Products .................................23

Figure2.10 Export Destinations of China’s Chicken and their Proportions ...............................24

Figure3.1 Changes in Introduction of GP Breeders, 2010-2017 .................................................29

Figure3.2 Changes in Inventory of GP Breeders and Parental Breeders in Production, 2010-

2017 .....................................................................................................................................................30

Figure3.3 Structure of GP Breeder Enterprises in 2017 ..............................................................31

Figure3.4 Changes in Slaughter of White Broilers in China, 2010-2017 ...................................34

Figure3.5 Slaughter Distribution of Commercial White Broilers in China by Provinces ..........34

Figure3.6 Changes in Price of White Broilers, 2012-2017 ...........................................................35

Figure3.7 Changes in Broiler Raising Profit in China, 2010-2017 ..............................................36

Figure3.8 Structure of Commercial White Broiler Enterprises in 2017 ......................................36




X

Figure3.9 Ex-factory Prices of Chicken Legs and Chicken Breast .............................................39

Figure3.10 Structure of White Chicken Circulation Channels .....................................................40

Figure4.1 Changes in Inventory of GP Yellow Breeders and Parental Yellow Breeders, 2011-

2017 .....................................................................................................................................................42

Figure 4.2 Structure of Yellow Broiler Breeder Enterprises in 2017 ...........................................43

Figure 4.3 Changes in Slaughter of Yellow Broilers in China, 2010-2017 .................................44

Figure4.4 Distribution of Slaughter of Commercial Yellow Broilers by Provinces ....................44

Figure4.5 Price Trend of Live Yellow Broilers, 2015-2017 ...........................................................45

Figure4.6 Changes in Yellow Broiler Farming Profit in China, 2015-2017 ................................46

Figure 4.7 Structure of Commercial Yellow Broiler Enterprises in 2017 ....................................47

Figure4.8 Yellow Broiler Circulation Channels ...............................................................................51

Figure5.1 Wens Group’s Broiler Industrial Chain ..........................................................................55

Figure5.2 Wens Group’s Slaughter and Price of Broilers ............................................................58

Figure5.3 Wens Group’s Operating Revenue and Gross Profit Rate of Broiler Business ......58

Figure5.4 Business Structure of New Hope Liuhe ........................................................................59

Figure5.5 Gross Revenue and Profit of New Hope Liuhe ............................................................63

Figure 5.6 Slaughter of Broilers .......................................................................................................63

Figure 5.7 Sunner Development’s Business Model ......................................................................64

Figure5.8 Slaughter Volume and Operating Revenue of Broilers of Sunner Development ....67

Figure5.9 Business Structure of Wellhope .....................................................................................68

Figure5.10 Sales Regions of Wellhope ..........................................................................................68

Figure5.11 Slaughter Volume of Broilers and Income from Slaughtering Business ................71

Figure5.12 Revenue Structure of Yisheng .....................................................................................72

Figure5.13 Sales Volume of Chicks ................................................................................................75

Figure5.14 Operating Revenue and Net Profit Rate .....................................................................76

Figure5.15 Revenue Structure of MINHE .......................................................................................77

Figure 5.16 MINHE’s Business Model ............................................................................................78

Figure 5.17 Sales Volume of Chicks ...............................................................................................80

Figure5.18 Operating Revenue and Net Profit of MINHE ............................................................80

Figure5.19 Product Mix of Xiantan ..................................................................................................81

Figure 5.20 Gross Operating Revenue and Net Profit of Xiantan ..............................................83

Figure5.21 Gross Revenue and Net Profit of Xiangjia Animal Husbandry ................................92

Figure 5.22 Revenue Structure of Guangxi Chunmao Investment Co., Ltd..............................93

Figure5.23 Gross Revenue and Net Profit of Guangxi Chunmao Investment Co., Ltd. ..........97

Figure5.24 Gross Revenue and Slaughter of Chuanwei Chicken ............................................100




XI

List of Tables

Table1.1 Numbers of Factories in Each Link of Whole Broiler Industry Chain .........................12

Table2.1 Countries Signing Chicken Import Agreement with China ...........................................19

Table2.2 Changes in Imports of Chicken and Entrails by Countries (2013-2017) ...................21

Table2.3 China’s Top 10 Importing Enterprises of Chicken and Entrails and Their Market

Shares, 2017 .......................................................................................................................................22

Table2.4 Export Structure of China’s Chicken Products ..............................................................23

Table2.5 China’s Top 10 Exporting Enterprises of Chicken and Entrails and Their Market

Shares in 2017....................................................................................................................................25

Table 2.6 China Chicken Supply and Demand Balance Sheet ...................................................26

Table5.1 Top 10 Shareholders of Wens and Their Shareholding Ratios ...................................54

Table5.2 Top 10 Shareholders and Their Shareholding Ratios ...................................................60

Table5.3 Main Shareholders and Shareholding Ratios of Sunner Development .....................64

Table5.4 Top 10 Shareholders and Their Shareholding Ratios of Wellhope .............................69

Table5.5 Major Shareholders and Their Shareholding Ratios .....................................................73





Table5.10 Revenue Structure of Xiangjia Animal Husbandry ......................................................89

Table5.11 Major Shareholders and Their Shareholding Ratios ...................................................89

Table5.12 Major Shareholders and Their Shareholding Ratios of Guangxi Chunmao

Investment Co., Ltd. ...........................................................................................................................93

Table5.13 Major Shareholders and Their Shareholding Ratios ..................................................98

Table6.1 Major Investment Projects in China's Broiler Industry in 2017 ..................................102

Table6.2 Development Trend of Meat Poultry Industry and Assessment of Investment

Attractiveness ...................................................................................................................................105

Table6.3 Broiler Industry Investment Advice and Risks .............................................................106




1

…….

Part Five Analysis of China’s Key Broiler Enterprises

5.1 Wens Group

5.1.1 Basic Profile

Founded in 1983, Guangdong Wens Foodstuffs Group Co., Ltd.( hereafter referred to as Wens)

is the largest broiler farming enterprise in China and stepped into pig raising industry in 1997.

By efficient industrialization model, it has become the No.1 of the industry.

(1) Business structure: At present, the Group takes chicken raising and hog farming as its

leading business, and broiler raising accounts for about 30% of its overall business; other

farming and sales businesses include cows, ducks, layers, deep-sea fish, sheep, eat pigeons,

etc.; supporting businesses are food processing, modern agricultural and animal husbandry

equipment manufacturing, veterinary drug production, and fresh food circulation chain.

(2) Sales areas: Guangdong and Guangxi are the major sales regions with sales share of

about 54%; East China, Central China and the Southwest respectively account for 23%, 11%,

and 9%; the sales proportion is 1% for North China, the Northeast and the Northwest

respectively.

(3) Sales channels: The main customer groups of commercial hogs and mutton sheep are

wholesalers and meat processing plants; the main customer groups of commercial broilers,

ducks, eggs, meat pigeons, deep-sea fish and dairy products are wholesalers and terminal

retailers; the main customer groups of raw milk are dairy products processing enterprises; the

main customer groups of agricultural and animal husbandry equipment and veterinary drugs

are farming enterprises, including Wens’ subordinate farming companies, subsidiaries, and




2

farming enterprises of the industry; the main customers of fresh products are chain stores,

and agencies and organizations.

Table5.1 Top 10 Shareholders of Wens and Their Shareholding Ratios

Name of Institution or Fund Shareholding (share) Shareholding Ratios

Wen Pengcheng 217 million 4.15%

Yan Juran 149 million 2.85%

Liang Huanzhen 143 million 2.74%

Wen Junsheng 140 million 2.68%

Li Wocan 132 million 2.52%

Wen Xiaoqiong 129 million 2.48%

Wen Zhifen 126 million 2.42%

Huang Bochang 109 million 2.08%

Yan Juneng 106 million 2.03%

Wen Muhuan 105 million 2.02%

Source of data: company announcement

5.1.2 Business Model

Centered on broiler raising business, Wens has extended its industrial chain to the upstream

and downstream. The upstream industry includes feed, food trade, veterinary drug and

vaccines, and agricultural and animal husbandry equipment; and the downstream industry

includes broiler slaughtering, chicken product processing, fresh food chain, and retail business.

Wens develops broiler raising business adhering to “Wens Model” with close-type “company

+ farmer(or family farm)” as the core. According to the technical difficulty, labor intensity, capital,

market and the allocation of other resources in the management of raising industrial chain, the

company cooperates with farmers in entrusted farming mode, and performs a rational division

of labor based on the requirements of industrial chain management. Wens and farmers

assume different responsibilities and obligations in the production process of commercial

broilers and commercial hog products.




3

Figure5.1 Wens Group’s Broiler Industrial Chain

Source of data: company announcement、BOABC

5.1.3 Key Competitive Factors

(1) The close-type “company + farmer (or family farm)” model adopted by Wens Group has

the advantages of an efficient industrial development model; this model is conducive to scale

expansion and cost control, and is in line with the development direction of moderate scale

farming and modern farming advocated by the government.

(2) Advantages of advanced technology system: The company has established a complete

production technology management system and formed a four-level technology management

structure including the headquarters technology center (research institute), business division,

production technology department of regional management companies, and technology

management group of farming companies.




4

(3) Enterprise management advantages based on full information coverage: The company

follows the management philosophy of “down shift of management center and highly

centralized data”, and uses internet management strategy to establish a cloud data center to

realize information management of production and operation data such as production, supply,

sales, human resources, finance, materials and others.

(4) Advantages of sales network: Wens has expanded market with farming companies in

various regions of the country as regional sales centers, and built the sales models of regional

platform sales and spot transactions to ensure timely sale of products produced by the Group.

(5) Experienced management team: The company's senior management team has been

trained internally, and experienced first-line production management, and fully recognized the

culture of Wens.

5.1.4 Investment Trend

(1) Farming: On January 18, 2017, Wens and the government of Ruyuan county held the

signing ceremony of integrated chicken farming project in Ruyuan County Government.

According to the plan, Wens will invest in an integrated chicken company and a layer farm

with capacity of 500,000 sets in Ruyuan County, and build supporting facilities including the

project headquarters, feed factory, farms, sales department, technical service centers, staff

quarters, etc.. After the project is completed, it is estimated that 18 million broilers and 8,000

tons of eggs will be marketed annually

(2) Slaughtering: In July 2017, Wens Group invested in Wens Jiafeng slaughtering project with

annual slaughter capacity of 50 million live poultry, and Wens’ slaughter capacity in Xinxing

will increase to more than 80 million birds after the completion of this project. As a leading




5

company in yellow broiler industry, Wens Group has gradually transformed itself into a whole

industrial chain enterprise integrating production, slaughtering, deep processing and sales by

investing in poultry slaughtering projects. After this slaughter project was completed, Wens’

self-built poultry slaughtering capacity only accounts for about 10% of its total slaughter of

broilers, and still can’t meet the development needs of its fresh yellow broiler business.

(3) Fresh products chain stores: At present, Wens has opened more than 200 chain stores of

Wens Shengxian and Wens Xianpin for family consumption mainly in Guangdong. Wens is

spreading chain stores in Hubei, Hunan, Hangzhou and other regions, and cooperates with e-

commerce enterprises such as JD and Taobao to expand market.

(4) Feed: Wens Group has cooperated with Twins Group to carry out customized feed

processing (OEM) in some regions, marking the start of transformation and upgrading of

China's animal husbandry industry and feed industry.

5.1.5 Analysis of Operation Situation

In the 30 years before 2013, the operating revenue of broiler business accounted for more

than 50% of Wens Group’s total operating income, being its main source of profit. Affected by

the bird flu in 2013, its broiler business suffered heavy loss and its operating income declined.

From 2014 to 2016, the broiler business grew slowly with a growth rate of approximately 3-

5%. In 2016, its operating income of broiler business increased to RMB18.593 billion,

accounting for 31.32% of the total operating revenue.

It is estimated that Wens’ slaughter, operating income and gross profit of broiler business in

2017 respectively were 800 million birds, RMB16.9 billion and 3.55%, separately down 2.32%,

9.11%, and 7.46% from 2016.




6

Figure5.2 Wens Group’s Slaughter and Price of Broilers

Source of data: BOABC, company announcement

Figure5.3 Wens Group’s Operating Revenue and Gross Profit Rate of Broiler Business

Source of data: BOABC, company announcement

………….

0

2

4

6

8

10

12

14

16

0

2

4

6

8

10

2012 2013 2014 2015 2016 2017E

Unit：yuan/kgUnit：100million birds

slaughter prices of broilers

-5.00%

0.00%

5.00%

10.00%

15.00%

20.00%

150

155

160

165

170

175

180

185

190

2012 2013 2014 2015 2016 2017E

Unit：100million yuan

revenue of boiler business gross profit rate




7

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China Hog Industry Atlas

Special Survey Service

With 15 years of industry research experience, BOABC is China's best data, information,

consulting service provider in agricultural and food fields. We have successfully provided

nearly a thousand Chinese and overseas enterprises and governmental agencies with all

kinds of special research services including industrial special subject research, market

research, strategy consulting, feasibility study on fund-raising investment alternative before

listing, regional planning, business plans and so on.

Typical Cases:

In 2005, provide Beijing Kaoshanju Group with research analysis before entering local

chicken breeding, and sales market;

In 2005, provide British Publishing Company with China’s animal health market research;

In 2006, successfully implement China’s animal health market research in 10 provinces and

municipalities for French MERIAL Group;

In 2008, provide duck research for GERSON LEHRMAN GROUP INC;

In 2011, provide a survey on poultry salmonella in China for a South Korean company.

In 2013, provide poultry market depth research in Anhui/Henan/Jiangxi province for jiangsu

lihua company.

In 2015, provide Avian influenza vaccine study for a Japanese company.

In 2015, provide poultry vaccine market research for a professional animal health industry

multinational group.

Contact TEL: 86-10-64402118

Add: Room 905, Jintai Golden Tower,

No. 1, Xibahe South Road, Chaoyang

District, Beijing

E-mail: [email protected]

Web site: www.cnagri.com

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transmitting, copy, record,

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