| Stock Code: 002714 Bond Code: 127045 | Stock Abbreviation: Muyuan Foods Bond Abbreviation: Muyuan Convertible Bond | Announcement No.: 2024-024 |
Summary of 2023 Annual Report of Muyuan Foods Co., Ltd.I．Important Notes
This summary is abstracted from the 2023 Annual Report of Muyuan Foods Co., Ltd.. Investorsmay refer to the full text of the report through the media designated by the China SecuritiesRegulatory Commission (CSRC) for further details of the business performance, financial situationand future development plans of Muyuan Foods Co., Ltd. (hereinafter referred to as "the Company").All directors attended the board meeting on which this report was reviewed.Notes on non-standard audit opinion?Applicable ?Not ApplicablePreliminary plan for profit distribution or capitalization of reserves in the reporting period asdeliberated by the board?Applicable ?Not ApplicableThe Company plans no cash dividend distribution, bonus issue, or converting capital reserve intoshare capital.II. Basic Information of the Company
1. Company Profile
| Stock abbreviation | Muyuan Foods | Stock code | 002714 | |
| Stock Exchange for stock listing | Shenzhen Stock Exchange | |||
| Stock abbreviation before change (if any) | None | |||
| Contact information | Secretary of the Board | Securities Affairs Representative | ||
| Name | Qin Jun | Cao Fang | ||
| Office Address | Longsheng Industrial Park, Wolong District, Nanyang City, Henan Province, China | Longsheng Industrial Park, Wolong District, Nanyang City, Henan Province, China | ||
| Fax | 0377-66100053 | 0377-66100053 | ||
| Telephone | 0377-65239559 | 0377-65239559 | ||
| myzqb@muyuanfoods.com | myzqb@muyuanfoods.com | |||
2. Main Business or Products Introduction during the Reporting Period(I) Summary of the Company’s OperationIn 2023, the Company sold 63.816 million pigs, including 62.267 million commercial pigs (ofwhich, 13.266 million were sold to the wholly-owned subsidiary Muyuan Meat Co., Ltd. and itssubsidiaries), 1.367 million piglets, and 181 thousand breeding pigs. And totally, 13.260 million pigswere slaughtered and 1.405 million tons of fresh and frozen pork products were sold in 2023.As a result, the Company achieved an operating revenue of RMB 110.86 billion yuan in 2023,showing a YOY decrease of 11.19%. Among the total revenue, the revenue attributable to slaughterand meat processing is RMB 21.86 billion yuan, representing a YOY increase of 48.54%. The netprofit was RMB -4.17 billion yuan, representing a YOY decrease of 127.91%.In 2023, the Company made continuous efforts in refined management to enhance pig healthand production management and improved pig farming results. In 2023, the Company improved itsmajor production indicators, and the annual average full cost of raising a commercial pig was around15 yuan per kilogram. In the coming years, the Company will continue to make smooth the technicalpath and optimize production management. With better herd health level, various productionindicators are expected to be further improved.
In 2023, the Company made continuous efforts in improving the efficiency of slaughterhousesthat are in operation, expanding meat sales markets and channels, optimizing client structure andimproving operating results. As a results, the capacity utilization rate of the slaughtering and meatprocessing division increased to 46% in 2023 from the 25% in 2022 and the loss per pig reducedsignificantly. In 2024, the slaughtering and meat processing division will strive to make more progressin the development of markets, channels, and customer demands, and make better internal productionmanagement to enhance its comprehensive operational capability and profitability, so as to supplyhigh-quality pork products to customers across the country.The year 2023 witnessed the Company’s further transformation from a high-speed developmentto a high-quality and stable development. The Company continuously promoted the construction ofsupporting facilities for planned pig farms, improved the biosecurity infrastructures, and strengthenedthe cost-control ability of pig farming. It also expanded to the upstream and downstream of theindustrial chain. A subsidiary of grain trading was established to lower purchase costs. And slaughter
business was distributed to match the existing pig production capacity to provide more high-qualitypork foods to the public. As of the end of 2023, the Company had 308 wholly-owned and holdingsubsidiaries in 25 provincial-level administrative regions across China.In 2023, the Company explored the potential of nutrition technology and developed and appliedlow-soybean diets to continuously reduce the proportion of soybean usage. In 2022, the proportionof soybean meal in the Company’s feed consumption was only 7.3%, which is about half of theindustry average level 14.5%. In 2023, the proportion was further decreased to 5.7%. In recent years,the Ministry of Agriculture and Rural Affairs (MARA) of the People’s Republic of China vigorouslypromoted the reduction and substitution of soybean consumption in animal feeds. These actions wereaimed to improve feed efficiency while reducing soybean consumption and broaden sources ofalternative ingredients for soybean, where efforts had been made in the demand end to reduce soybeanusage and in the supply end to supply more alternative resources. In response, the Company activelyshared its core technology with the industry to promote low-soybean diets. As a result, soybean mealusage in feed formulas in China reduced to 13% in 2023, a YOY reduction of 1.5 percentage points.In 2023, the Company worked with the Westlake University in the field of synthetic biology andcarried out R&D in related cutting-edge science and technology. It also cooperated with Mint BioTech(Hangzhou) Co., Ltd (元素驱动（杭州）生物科技有限公司) to establish the Henan MuyuanAnliang Synthetic Biology Technology Co., Ltd （河南牧元安粮合成生物技术有限公司）for theconsumption reduction and substitution of soybean meal and the development of other bio-basedproducts. The Company will continue to use advanced synthetic biology technologies to explore thelow-soybean diet technology.Changzhou Qianhong Biopharma Co., Ltd (常州千红生化制药股份有限公司) boasts itsprofessional manufacture technologies of and quality management experiences in crude products,bulk drugs, and preparations of heparin sodium. In 2023, the Company co-established the HenanQianmu Biopharma Co., Ltd (河南千牧生物制药有限公司) with Changzhou Qianhong to build aworld-class biopharmaceutical base with leading traceability for producing heparin sodium crudeproducts, heparin sodium, low molecular heparin sodium and other related products from pig by-products such as small intestines, leveraging the Company’s resource advantages in pig farming andslaughtering. Joint venture projects related to this are expected to further expand the Company’s
industrial chain and enhance its comprehensive profitability. These projects are currently underconstruction and are expected to begin trial production by the end of 2024.In 2023, the Company took active actions such as reducing fossil energy consumption anddeveloping new energies like solar photovoltaic (PV) power to promote energy structuretransformation and achieve peak carbon and neutrality goals. In the reporting period, the Companyestablished unified management for affairs related to new energy. New energy companies wereestablished as project construction and operation entities in counties where PV projects were proposedto be launched. On the premise of not affecting the main business and not causing biosafetymanagement risks, internal teams planned and designed to utilize the roofs of farms andslaughterhouses to construct distributed PV facilities. Where the power demand of each farm orslaughterhouse was satisfied, the extra power was supplied to the grid. Through the development andutilization of green energy, the production cost was reduced. In 2023, the Company’s PV facilitiesgenerated 36.88 million kW·h. Later, the Company will determine the feasibility of modes such asroof renting and cooperation with electric power companies, further optimize its energy structure,increase the usage of green power, and achieve low-carbon production and sustainable development.In 2023, the Company optimized its organizational management structure. Three businessdivisions (feed, pig production, and pig slaughtering) and eight functional platforms were set up toimprove operation and management efficiency and reduce management costs. To build a talent teamthat is younger, more international, and more professional, the HR Department of the Companycarried out various activities to attract college graduates and launched several overseas specialrecruitment activities to engage international students. It established well an assessment mechanismto select and position talents and a cultivation mechanism for talents in the pool to empower themprecisely and improve their professional competence and qualities continuously. Through enhancedperformance management, the salary and remuneration mechanism was optimized to give outstandingemployees higher rewards and motivate employees to be more proactive. Through the personneladministration mechanism, employees were made clear about their promotion channels. By doing so,talents were matched with suitable positions and have given full play on their role while the talentneeds of the Company’s high-quality development were met.
(II) Main business, products, and their uses
The Company’s main business is the farming, sales, and slaughter of pigs. Its main productsinclude commercial pigs, piglets, and breeding pigs, as well as pork products such as pork carcassesand finely cut pork. As of the end of 2023, the Company's annual pig farming capacity was about 80million heads, and 10 slaughterhouses were put into operation, with an annual pig slaughter capacityof 29 million heads.
(III) Business model
The Company adopts a vertically integrated business model and has formed an pork industrialchain, integrating feed processing, pig breeding, pig raising, pig slaughtering, and meat processing,that covers the whole pig industrial value chain. The vertically integrated business model has enabledthe Company to carry out stricter control of costs and quality and ensure business results in an all-round way.
The Company has its own feed mills to independently develop nutrition formulas and producefeeds to meet the needs of pigs of all stages, where feed formulas can be adjusted timely in accordancewith the changes in the raw grain market. Low-soybean diet technology has been applied to reducethe usage of soybean meals to control the feeding costs.
The Company adopts the two-breed rotational crossbreeding system to select continuously andindependently and build its own nucleus herds, which is helpful to reduce the production costs anddisease risks. At the same time, the Company’s breeding pigs can satisfy both breeding needs andproduction needs, in terms of reproductive performance, growth rate, lean meat percentage, andcarcass quality, laying a foundation for the rapid development of the Company.
The Company attaches great importance to R&D innovations and the application of smartequipment. It has independently developed a fresh air filtration system, independent ventilationsystem, intelligent environment control system, intelligent feeding system, etc. A series of intelligentequipment operate in a collaborative manner. It aims to improve pig farming efficiency, lower pigfarming costs, and promote the transformation and upgrading of the industry through technology-ledand innovation-driven development.
In 2023, the Company stuck to the business model of independent pig farming and slaughter.The whole production process was made transparent, controllable and traceable, food quality andsafety was ensured, and more high-quality pork products were provided to customers.
By the end of 2023, the Company had set up 26 slaughtering subsidiaries across China, with allslaughtered pigs supplied from its own farms. The Company has been expanding its pork salesnetwork in China. By the end of 2023, more than 60 service stations in 20 provincial-leveladministrative regions across China had been set up for the Company’s slaughtering and meatbusiness.
(IV) Industry development
1. China as the world's largest pork production and consumption country
Data from the National Bureau of Statistics of China (NBSC) shows that 726.62 million pigswere marketed in China in 2023, an increase of 3.8% over the previous year. As of the end of 2023,the national inventory of reproductive sows and live pigs were 41.42 million and 434.22 million, andecrease of 5.7% and 4.1% over the previous year, respectively.
(Data source: NBSC)
China currently is the largest pork producer in the world. According to data released by the U.S.Department of Agriculture (USDA), China's pork production in 2023 accounted for 49.39% of globalproduction, ranking first in the world.
(Data source: USDA)China is also the largest pork consumption country in the world. Pork is the most importantsource of animal protein for Chinese people, and has long been dominant in meat consumption inChina. According to NBSC, China's pork production in 2023 was 57.94 million tons, accounting for
60.10% of the meat production of main livestock and poultry.
(Data source: NBSC)
2. Pig price trend
China’s pig market is characterized by significant cyclicity. The fluctuation of pig supply is themain factor affecting pig price. Data from the NBSC shows that 726.62 million pigs were marketedin China in 2023, an increase of 3.8% over the previous year. Pork output saw a YOY increase of
4.6%, standing at its highest-recorded volume since 2015, at 57.94 million tons. Large pig output andobviously increased pork output are the main reasons behind the low pig price in 2023. Live pig pricesstarted to decrease in December 2022. In 2023, pig prices generally remained low, with only atemporary rebound in Q3.
(Data source: MARA)
3. Continuously improved pig farming scale
In China, small-scale pig farming has long been the main pattern in the pig industry, leading toa low industry concentration. There is a large number of backyard farming households and small- tomedium-sized farms. In recent years, intensive pig farming and the industry concentration ratio inChina have been in the rise. The industry is moving towards high-quality development to better satisfypeople’s increasing demands for high-quality pork. According to statistics from the Ministry ofAgriculture and Rural Affairs (MARA) of the People’s Republic of China, the proportion of intensivepig farming by the end of 2023 was estimated to reach about 68%, an increase of around 3 percentage
points over 2022. According to public data, China’s top 10 listed pig farming companies sold about
149.15 million heads of pigs in total in 2023, accounting for 20.53% of the total national output,showing an increase over 2022.
3. Main accounting data and financial indicators
(1) Main accounting data and financial indicators in the past three yearsWhether the Company needs to make retroactive adjustments or restate the accounting data ofprevious years or not?Yes ?No
Unit: yuan
| End of 2023 | End of 2022 | YOY change | End of 2021 | |
| Total assets | 195,404,553,902.24 | 192,947,611,799.00 | 1.27% | 177,265,759,187.58 |
| Net assets attributable to shareholders of the Company | 62,828,051,373.10 | 71,783,350,329.31 | -12.48% | 54,351,768,519.36 |
| 2023 | 2022 | YOY change | 2021 | |
| Operating revenue | 110,860,727,714.40 | 124,826,212,177.74 | -11.19% | 78,889,870,566.40 |
| Net profits attributable to shareholders of the Company | -4,263,280,820.31 | 13,266,156,512.39 | -132.14% | 6,903,777,691.92 |
| Net profits attributable to shareholders of the Company after deduction of non-recurring profit or loss | -4,026,262,919.48 | 13,029,323,049.56 | -130.90% | 6,785,021,475.69 |
| Net cash flow from operations | 9,892,816,863.72 | 23,010,550,801.93 | -57.01% | 16,295,026,813.82 |
| Basic EPS (yuan / share) | -0.79 | 2.49 | -131.73% | 1.28 |
| Diluted EPS (yuan / share) | -0.79 | 2.45 | -132.24% | 1.28 |
| Weighted average ROE | -6.38% | 21.01% | Declined by 27.39 percentage points | 12.91% |
(2) Main accounting data by quarter
Unit: yuan
Whether the above financial indicators or their total amount are significantly different from therelated financial indicators disclosed in the Company's quarterly or semi-annual reports.?Yes ?No
4. Share Capital and Shareholders
(1) The number of common shareholders and preferred shareholders with resumed votingrights and the shareholding of the top 10 shareholders
Unit: share
| Total number of common shareholders at the end of the reporting period | 261,828 | Total number of common shareholders at the end of the month before the disclosure date of the annual report | 233,988 | Total number of preferred shareholders with resumed voting rights at the end of the reporting period | 0 | Total number of preferred shareholders with resumed voting rights at the end of the month before the disclosure date of the annual report | 0 | |
| Shareholding of the top 10 shareholders (excluding shares lent through refinancing) | ||||||||
| Shareholder name | Shareholder nature | Shareholding percentage | Number of shares held | Number of restricted shares held | Pledged, marked or frozen shares | |||
| Share status | Quantity | |||||||
| First quarter | Second quarter | Third quarter | Fourth quarter | |
| Operating revenue | 24,198,301,291.41 | 27,670,673,174.68 | 31,099,681,034.63 | 27,892,072,213.68 |
| Net profits attributable to shareholders of the Company | -1,198,054,174.39 | -1,581,163,482.85 | 936,888,334.97 | -2,420,951,498.04 |
| Net profits attributable to shareholders of the Company after deduction of non-recurring profit or loss | -1,252,147,469.20 | -1,533,995,805.80 | 1,070,560,056.56 | -2,310,679,701.04 |
| Net cash flow from operations | -3,853,793,609.91 | 2,809,751,622.26 | 7,732,067,647.65 | 3,204,791,203.72 |
| Qin Yinglin | Domestic natural person | 38.17% | 2,086,287,906 | 1,564,715,929 | Pledged | 293,940,000 |
| Muyuan Industrial Group Co., Ltd. | Domestic non-state-owned corporation | 15.28% | 834,925,406 | 150,112,584 | Pledged | 270,039,400 |
| Hong Kong Securities Clearing Company Ltd. (HKSCC) | Overseas corporation | 2.66% | 145,301,988 | 0 | Not Applicable | 0 |
| Sun Huigang | Domestic natural person | 1.57% | 85,683,509 | 0 | Not Applicable | 0 |
| Qian Ying | Domestic natural person | 1.18% | 64,445,240 | 48,333,929 | Not Applicable | 0 |
| Muyuan Foods Co., Ltd. – Phase II Employee Stock Ownership Plan | Others | 1.03% | 56,443,800 | 0 | Not Applicable | 0 |
| China Securities Co., Ltd. | Domestic non-state-owned corporation | 0.70% | 38,222,432 | 0 | Not Applicable | 0 |
| Cai Min | Domestic natural person | 0.54% | 29,352,500 | 0 | Not Applicable | 0 |
| Qian Yunpeng | Domestic natural person | 0.43% | 23,573,397 | 0 | Not Applicable | 0 |
| Industrial and Commercial Bank of China Limited -- Huatai-Pinebridge CSI 300 Exchange Traded Open-End Index Securities Investment Fund | Others | 0.37% | 20,408,581 | 0 | Not Applicable | 0 |
| Description of affiliated relations or concerted actions among the above shareholders | Mr. Qin Yinglin and Mrs. Qian Ying are the actual controllers of the Company. Mr. Qin Yinglin and Mrs. Qian Ying jointly hold 100% equity of Muyuan Group and hold 54.63% equity of the Company directly and indirectly. Qian Yunpeng is the elder brother of Qian Ying. It is unknown whether other shareholders have affiliated relations or act in concert. | |||||
| Description of shareholders participating in Securities | Sun Huigang holds 6,000,000 shares of the Company through his common securities account, and 79,683,509 shares through his collateral securities | |||||
| Margin Trading (if any) | account for margin trading, representing a total holding of 85,683,509 shares. Cai Min holds 3,602,500 shares of the Company through her common securities account, and 25,750,000 shares through her collateral securities account for margin trading, representing a total holding of 29,352,500 shares. |
Participation of top 10 shareholders in share lending for refinancing?Applicable ?Not Applicable
Unit: share
| Participation of top 10 shareholders in share lending for refinancing | ||||||||
| Shareholder name (full name) | Shares held through common accounts and credit accounts at the beginning of the period | Shares lent for refinancing but not yet returned at the beginning of the period | Share held through common accounts and credit accounts at the end of the period | Shares lent for refinancing but not yet returned at the end of the period | ||||
| Total | Proportion to total share capital | Total | Proportion to total share capital | Total | Proportion to total share capital | Total | Proportion to total share capital | |
| Industrial and Commercial Bank of China Limited -- Huatai-Pinebridge CSI 300 Exchange Traded Open-End Index Securities Investment Fund | 9,814,181 | 0.18% | 1,091,000 | 0.02% | 20,408,581 | 0.37% | 14,200 | 0.00% |
Changes in top 10 shareholders compared to the previous period?Applicable ?Not Applicable
Unit: share
| Changes in top 10 shareholders compared to the end of the previous period | |||||
| Shareholder name (full name) | Joined/ exited during this reporting period | Shares lent for refinancing but not yet returned at the end of the period | Shares held through common accounts and credit accounts & lent for refinancing but not yet returned at the end of the period | ||
| Total | Proportion to | Total | Proportion to | ||
| total share capital | total share capital | ||||
| Qian Yunpeng | Joined | 0 | 0.00% | 23,573,397 | 0.43% |
| Industrial and Commercial Bank of China Limited -- Huatai-Pinebridge CSI 300 Exchange Traded Open-End Index Securities Investment Fund | Joined | 14,200 | 0.00% | 20,422,781 | 0.37% |
| Hainan Hongbao Investment Co., Ltd. | Exited | 0 | 0.00% | 14,600,000 | 0.27% |
| Li Yanyan | Exited | 0 | 0.00% | 6,321,610 | 0.12% |
(2) Total number of preferred shareholders and the shareholdings of the top 10 preferredshareholders of the Company?Applicable ?Not ApplicableThere were no preferred shareholders holding shares of the Company during the reporting period.
(3) Ownership and control relations between the Company and the actual controllers
5. Bonds in existence as of the approval date of the annual report
?Applicable ?Not Applicable
(1) Basic information of bonds
| Bond Name | Bond Abbreviation | Bond Code | Issue Date | Due Date | Bond Balance (10,000 yuan) | Interest Rate |
| Convertible Bond of Muyuan Foods Co., Ltd. | Muyuan Convertible Bond | 127045 | August 16, 2021 | August 15, 2027 | 954,355.49 | 1st year: 0.20%; 2nd year: 0.40%; 3rd year: 0.80%; 4th year: 1.20%; 5th year: 1.50%; and 6th year: 2.00%. |
| Interest payment and cashing of corporate bonds during the reporting period | Muyuan Convertible Bond paid the 2nd-year interest at par on August 16, 2023 for the period from August 16, 2022 to August 15, 2023, with a coupon rate of 0.40% and the interest was RMB 4 (including tax) for every 10 Muyuan Convertible Bonds (par value RMB 1,000). | |||||
(2) Latest tracking bond ratings and changes
During the reporting period, China Chengxin International Credit Rating Co., Ltd. (CCXI)issued the 2023 Tracking and Rating Report on Muyuan Foods Co., Ltd. on June 27, 2023. Itmaintained the Company's main credit rating as AA+, adjusted the rating outlook to Stable fromNegative, and maintained the credit rating of "Muyuan Convertible Bond" as AA+. For moredetails, please see www.cninfo.com.cn.
(3) Main accounting data and financial indicators in the past two years as of the end of thereporting period
Unit: 10,000 yuan
| Item | 2023 | 2022 | YOY change |
| Liabilities to assets ratio | 62.11% | 54.36% | 7.75% |
| Net profit after deduction of non-recurring profit or loss | -402,626.29 | 1,302,932.30 | -130.90% |
| EBITDA/Total Debt ratio | 15.02% | 44.02% | -29.00% |
| Interest coverage ratio | -0.29 | 6.12 | -104.74% |
III. Significant MattersNone
Qin Yinglin, ChairmanMuyuan Foods Co., Ltd
April 25, 2024