Review on the Management of Yike Food’s 2021 Annual Board of Directors

() The business review of the Board of Directors in 2021 is as follows:

　　I. The industry in which the company is located during the reporting period.

(I) General situation of the development of the company’s industry

According to the National Economic Industry Classification (GB/T4754-2017), the poultry slaughtering and processing business of the company belongs to the "C1352 poultry slaughtering" industry under "C135 slaughtering and meat processing"; The company’s feed production and sales business belongs to the "C1329 Other Feed Processing" industry under "C132 Feed Processing"; The sub-industry of the company’s commercial poultry seedling incubation and sales business is "A0531 Animal Breeding Activities" under "Animal Husbandry Professional and Auxiliary Activities"; The company’s production and sales of cooked food and conditioning products belong to the sub-industry of C1353 meat products and by-products processing under C135 slaughter and meat processing.

According to the Guidelines for Industry Classification of Listed Companies issued by China Securities Regulatory Commission, the company belongs to "C13 agricultural and sideline food processing industry".

According to China Poultry Industry Development Report, the poultry industry is a livelihood industry involving many farmers, which plays an important role in meeting the needs of residents for animal protein, ensuring the stable supply of major poultry products, increasing farmers’ income and actively participating in international competition. Since the reform and opening up, China’s meat and poultry industry has developed by leaps and bounds, forming a complete industrial system from breeding and commodity breeding in the upper reaches, slaughtering and processing in the middle reaches, and food production in the lower reaches. According to the Statistical Bulletin of National Economic and Social Development issued by the National Bureau of Statistics over the years, the output of poultry meat in China increased from 17.51 million tons to 23.8 million tons from 2014 to 2021.

With the rapid growth of the overall scale of the industry, all links have also achieved different degrees of development: in terms of upstream poultry breeding, under the policy, domestic enterprises have made a series of breakthroughs through technology introduction or self-research, gradually breaking the situation that some great-grandparent poultry breeds were completely monopolized by foreign companies in the past; In terms of commercial poultry breeding, with the changes of market supply and demand and competition pattern, the proportion of large-scale breeding has gradually increased. At the same time, the feed industry supporting breeding poultry and commercial poultry breeding is also maturing. According to China Feed Industry Yearbook and National Feed Industry Development Survey, China’s annual output of meat poultry feed is 89.096 million tons in 2021. In the poultry slaughtering and processing industry in the middle reaches, as a link between the preceding and the following in the industrial chain, the production efficiency has been continuously improved. On the one hand, the matching with the main breeding areas is more perfect, on the other hand, the ability to respond to the individual requirements of different specifications, locations, time and dosage in the lower reaches has been gradually improved, and industrialization and scale have developed rapidly. In the downstream cooked food processing industry, the development of cooking technology and consumption scenarios are constantly enriched, and the product categories are constantly innovating. National brands have emerged in individual segments.

From the product structure, poultry meat mainly includes chicken and duck. At present, the share of chicken meat in China’s market is relatively high, and the share of duck meat is constantly increasing. According to the data of China Poultry Industry Development Report, the total output of duck meat in 2020 will be 10,938,000 tons (including 9,280,400 tons of white feather duck). Compared with livestock meat, poultry meat has higher protein content and nutritional value, and lower fat and carbohydrate content. Processed poultry meat products become instant food that can be eaten directly, and more and more become an indispensable table and snack food in people’s lives.

(II) Overview of the industry in which it is located during the reporting period

Influenced by the change of supply and demand, feed price and epidemic situation, the prosperity of poultry industry presents certain fluctuation characteristics.

During the reporting period, the epidemic situation at home and abroad was repeated, and due to extreme weather and other factors, the price of grain rose sharply, the prices of feed raw materials such as corn and soybean meal continued to be high, and the breeding cost continued to rise; At the same time, during the reporting period, the downward price of pork and the huge supply of pork in the market brought great challenges to the meat market.

(III) The development trend of the industry in which the company is located

1. Food safety concerns are constantly improving.

With the rapid development of the global economy, the improvement of people’s living conditions and the continuous spread of manufacturing technology, the scale of food production continues to expand, showing a vigorous development momentum. While the demand for food is growing steadily, the global food safety problem has also become a hot spot of social concern. In China, since 2004, the relevant government departments have revised or promulgated the Food Safety Law of People’s Republic of China (PRC), the Regulations on the Administration of Veterinary Drugs, the Regulations on the Administration of Feed and Feed Additives, and the Regulations on the Prevention and Control of Pollution in Large-scale Livestock and Poultry Breeding, which reflects that the state has paid more and more attention to food safety issues, and the supervision and punishment for food safety violations are gradually increasing.

Under the background of increasing attention to food safety, China’s food safety traceability system is gradually being established and improved.

2. There is huge market space for poultry consumption growth.

Although the total consumption of poultry meat in China keeps increasing, there is still a big gap between the per capita consumption and that of developed countries and regions. According to the data of the National Bureau of Statistics, the total population of mainland China was 1,412.6 million in 2021. According to the calculation that all the poultry meat produced in 2021 was digested in China, the annual consumption of poultry meat per capita in China was only 16.85 kg.

According to the statistics of the website of the US Department of Agriculture, the annual per capita poultry meat in the United States has exceeded 60 kilograms, which is much higher than the consumption level in China. In addition, with the changes of meat demand and supply structure, consumption concept and consumption habits, China’s meat consumption structure will gradually change from traditional to convenient and fast, from pursuing quantity to pursuing health, individuality, youthfulness and functionality, the proportion of poultry consumption will be further improved, and the structural pattern of pork share will change. In 2021, the total output of pork in China was 52.96 million tons, exceeding the total output of poultry meat. In the United States, however, the output of poultry meat is close to that of pork. Compared with the United States, there is still much room for improvement of poultry in China.

3. The consumption of duck meat will further increase.

First of all, duck meat has extremely high nutritional value. According to the second edition of China Food Composition Table, the content of vitamin A in duck meat is 2.5-7 times higher than that of pork, beef and mutton, and the content of iron is significantly higher than that of pork and chicken. Every 100g of edible duck meat contains 9.3g of monounsaturated fatty acids, accounting for 50% of the total fatty acids, which is significantly higher than that of other meats, while the proportion of saturated fatty acids is 30%, which is lower than that of other meats, and is beneficial to enriching blood and maintaining the health of eyes, nose and mouth mucosa. Secondly, duck meat occupies an important position in China’s food culture. In recent years, consumption scenes are constantly enriched, and consumption areas are constantly expanding, including not only cooking in traditional catering channels, such as roast duck, salted duck and duck blood vermicelli, but also the proportion of leisure consumption is constantly increasing, and preserved fresh and packaged marinated products are constantly emerging. The change of market positioning has also made consumers pay more attention to duck products, and industry operators have further studied the market development methods, and the consumption of duck meat will be further improved.

4. The proportion of large-scale farming has been further improved.

Compared with small-scale free-range farming, large-scale farming has the advantages of high production efficiency, high standardization and easy management. In recent years, the upstream aquaculture end of the industrial chain, especially commercial poultry farming, has evolved from small-scale free-range farming to large-scale and standardized farming, and the degree of large-scale production has been continuously improved. According to the third national agricultural census in 2017, the stock of poultry farming in China accounted for 73.9%. However, compared with developed countries and regions, the scale of poultry breeding in China is still at a low level. According to the data of the 2017 agricultural census in the United States, the number of farms with 10,000 or more chickens in the American broiler breeding industry accounts for 97.1%. Therefore, there is still room for the scale development of poultry breeding in China.

5. Industrial chain integration has become an important direction of industry development.

With the help of capital, technology, scale and other advantages, some advantageous enterprises gradually extend to other links in the industrial chain, or directly build a production system with a full cycle of the whole industrial chain, or first form a diversified production enterprise with multiple links and businesses in the industrial chain to stabilize the performance fluctuations of different sectors and maintain the competitive position in the market. Industrial chain integration will become an important direction of industry development.

(IV) The position of the company in the industry

After years of development, the company has become a leading poultry food enterprise in China, and its main business mainly covers four business sectors: poultry slaughtering and processing, feed production and sales, hatching and sales of commercial poultry seedlings, and production and sales of cooked food and conditioning products.

From 2018 to 2021, with the total poultry meat market increasing year by year, the company’s poultry meat product output grew at a faster rate than the industry growth, and its market share increased from 4.38% to 5.52%, further consolidating its position in the industry. At present, the company is the executive chairman unit of Baiyu Meat Duck Working Committee of China Animal Husbandry Association, the vice chairman unit of Waterfowl Branch of Shandong Animal Husbandry Association, the executive director unit of Shandong Meat Association and the vice chairman unit of Shandong Feed Industry Association, and has won many honors such as National Key Leading Enterprises in Agricultural Industrialization, Top 20 Enterprises in Agricultural Products Processing Industry in Jiangsu Province, Provincial Key Leading Enterprises in Agricultural Industrialization in Jiangsu Province, Advanced Enterprises in China Meat Food Industry in 2021 and Most Valuable Brand in China Meat Food Industry in 2021.

The company has obtained the certification of Hazard Analysis and Critical Control Point (HACCP) in GB/T 27341-2009, the certification of food safety management system in GB/ T 22000-2006/ISO 22000: 2005 standard GB/T 27303-2008 and GB/ T24001-2016 IDT ISO 14001: 2015 Environmental Management System Certification Certificate, etc., has a good quality control system, serves more than 2,000 high-quality customers across the country, and has become the flagship product of new retail such as Ding Dong’s grocery shopping and box horse fresh food, an important partner of large-scale catering such as Haidilao and Pizza Hut, and meets a large number of stable demands of well-known brands such as Anjing, Shuanghui, Zhou Heiya and Juewei.

In the future, with the gradual production of the company’s initial public offering and investment projects, it will help the company’s market share to be further enhanced and its comprehensive competitiveness will be further enhanced.

II. Main businesses of the Company during the reporting period

The company shall comply with the disclosure requirements of "business related to food and wine manufacturing" in the Guidelines for Self-regulation of Listed Companies of Shenzhen Stock Exchange No.3-Disclosure of Industry Information, and the company shall comply with the disclosure requirements of "business related to livestock and poultry and aquaculture" in the Guidelines for Self-regulation of Listed Companies of Shenzhen Stock Exchange No.3-Disclosure of Industry Information.

(I) Overview of the company’s main business

The company is a leading poultry food enterprise in China. During the reporting period, the company’s main business scope mainly covers many links in the industrial chain of meat and poultry industry, mainly including four sectors: poultry slaughtering and processing (hereinafter referred to as "slaughtering sector"), feed production and sales (hereinafter referred to as "feed sector"), commercial poultry seedling incubation and sales (hereinafter referred to as "breeding sector"), and production and sales of cooked food and conditioning products (hereinafter referred to as "cooked sector").

(II) Introduction of the company’s main products

During the reporting period, the main products of the company’s business segments include: slaughter segment: slaughter business is engaged in the slaughter and segmentation of meat ducks and broilers, in which duck products mainly include duck neck, duck head, duck breast, duck wings, duck legs, duck feet, duck gizzards and duck blood; Chicken products mainly include chicken breasts, chicken legs, chicken wings and chicken feet.

Feed plate: feed business is to produce and sell feed, and the main products include duck feed and chicken feed.

Poultry breeding plate: the poultry breeding business is the production, incubation and sales of commercial substitute chickens and ducks, and the main products include commercial substitute ducks and chickens.

Cooked plate: Cooked business includes prepared products and cooked food business. Among them, the cooked food business mainly operates "Aiya" brand marinated food, and its main products include leisure marinated food such as duck neck, duck collarbone, duck paw and duck wings. According to the product form, it is divided into two categories: fresh products and packaged products; The business of conditioning products is mainly to produce and sell conditioning products. The main products include more than 100 kinds of conditioning products such as curing, cooking, frying and smoking.

(III) Main performance drivers

1. The industry demand is improving.

White meat, such as poultry meat, has the health attributes of high protein and low fat content. With the changes of meat demand and supply structure, consumption concept and consumption habits, China’s meat consumption structure will gradually change from traditional to convenient and fast, from pursuing quantity to pursuing health, individuality, youthfulness and functionality. The proportion of poultry meat consumption will be further improved, and the structural pattern of pork share will change, so China’s poultry has a greater room for improvement.

In recent years, the modern catering service industry represented by chain restaurants has developed rapidly. Because of the higher standardization, lower cost and stronger processing properties of poultry meat, catering channels are more willing to use poultry meat as meat raw materials to a certain extent, which promotes the growth of poultry meat consumption.

2. Integrated layout of industrial chain

During the reporting period, the company’s main income and profit came from poultry slaughtering business. For the slaughtering meat processing industry, its operation is closely related to the fluctuation of upstream aquaculture, so the integrated layout is particularly important. On the one hand, the integrated layout can effectively reduce the transaction costs of all links in the industrial chain and improve the overall profitability of the company. On the other hand, the integrated layout can effectively stabilize the fluctuation of the cycle, especially in the field of deep processing. Because it includes processing value-added and brand premium, the gross profit margin is generally higher. Now, the company has completed the multi-link layout of the meat and poultry industrial chain. In the future, the company will continue to strengthen the weak links in the downstream of the industrial chain, further increase the proportion of high value-added products, and further enhance its competitiveness by taking advantage of the integration of the industrial chain.

(4) Business model

The company’s main business mainly covers poultry slaughtering and processing, feed production and sales, commercial poultry seedling incubation and sales, and the production and sales of cooked food and conditioning products. In terms of operation and management, on the one hand, all sectors are independent of each other and have the ability to operate independently; On the other hand, because they belong to the industrial chain of the meat and poultry industry, there is a certain degree of upstream and downstream linkage between the business sectors. By well managing the upstream and downstream linkage of the industrial chain, the efficiency of the industrial chain can be improved, and the company can obtain higher synergistic benefits, thus effectively resisting the business risks of a single business link in the industrial chain.

1. Purchasing mode

(1) Slaughtering plate

Raw materials for slaughter business are hairy ducks and chickens, and the company mainly adopts breeding contract procurement mode to meet the needs of slaughter business. Under the breeding contract procurement mode, the company first signed the "Duck/Chicken Procurement Framework Contract" with the breeding owners; Subsequently, the companies in the slaughter plate signed batch contracts with the aquaculture owners according to the annual production plan.

Breeding owners need to breed in accordance with the breeding terms agreed in the Purchase Framework Contract for Hairy Duck/Hairy Chicken and the batch contract, and the companies in the slaughter plate purchase the hairy duck or the hairy chicken according to the price settlement formula agreed in the batch contract. The company mainly purchases from aquaculture owners near the company’s slaughter line.

(2) Feed plate

The raw materials purchased for feed business are mainly corn and soybean meal. The mode of feed business procurement is centralized inquiry procurement and personalized customization. Centralized inquiry procurement is mainly aimed at raw material varieties (corn and soybean meal) with large usage, which are mainly purchased from bulk raw material suppliers or grain and oil enterprises. Personalized customization refers to some by-products of corn and wheat, etc. The company negotiates and purchases with partners according to the feed formula.

(3) Poultry plate

The company’s poultry breeding business mainly purchases parents’ seedlings (parents’ ducks and parents’ chickens) and feed.

The procurement mode of the company’s parents breeding duck chicks and parents breeding chicken chicks is the introduction plan mode. Under the introduction plan mode, the purchase quantity is arranged according to the production plan. According to the production capacity provided by the production department, the production department shall submit the overall procurement plan and batch procurement plan for the next year before the end of December each year, and the procurement department shall sign a letter of intent with the supplier after it is approved by the procurement leading group of the poultry platform. On the basis of the annual overall procurement plan, the procurement department arranges the procurement in batches according to the annual production plan, and signs specific procurement contracts with suppliers. Under normal circumstances, the seedling purchase contract is signed within 2 months before the specific introduction of duck seedlings; Chicken seedlings shall sign a seedling purchase contract within 1 month before the specific introduction.

At present, the purchase mode of the feed that parents need for breeding poultry on the poultry breeding platform is mainly internal quantitative purchase. Under the internal quantitative purchase mode, the purchasing department of the poultry breeding platform directly signs a feed purchase contract with the feed sector subsidiary according to the production plan to ensure a long-term and stable supply of feed, and purchases once every 3-4 days on average.

(4) Cooked plates

Raw materials purchased by cooked food and conditioning products business mainly include raw meat and accessories. The purchase mode of raw meat used in the production of cooked food and conditioning products business is mainly internal quantitative purchase; For some raw meat and accessories, the procurement mode is mainly external inquiry procurement. Under the internal quantitative procurement mode, the purchasing department of cooked food and conditioning products directly purchases raw meat from the companies in the company’s slaughter plate according to the production plan to ensure the high quality and stable supply of raw meat. In principle, it purchases daily. Under the external inquiry purchasing mode, the purchasing department selects the appropriate suppliers for inquiry, price comparison and negotiation according to the materials requested by the production department, and finally signs a purchase contract, and makes an average of 1-4 purchases per month according to different categories of materials requested.

2. Production mode

The company’s main business includes slaughter, feed, poultry breeding and cooked food. At present, the main production mode is independent production. Due to the gradual production of Shandong Yixing Agriculture and Animal Husbandry, Mengyin Jinjiyuan and Mengyin Kangyu subsidiaries, the egg production capacity is gradually released. In order to ensure the timely supply of farmers’ orders and solve the problem of tight hatching capacity when eggs are produced centrally, the company’s poultry plate has some entrusted hatching business. During the cooperation, the company managed the whole process in the aspects of trustee selection, incubation standards and acceptance and warehousing, and there were no major quality problems of chickens and ducks during the reporting period.

3. Sales model

(1) Slaughter plate: The customers of the company’s chicken products and duck products include direct selling customers and distribution customers. Direct sales customers, mainly Zhou Heiya, () and Shuanghui Fa.

Zhandeng Distribution customers, mainly the company’s dealers and supermarkets.

(2) Feed sector: The company’s feed business mainly sells feed directly to breeding companies or owners.

(3) Poultry breeding plate: The company’s poultry breeding business mainly sells commercial substitute chickens and ducks directly to breeding companies, owners or enterprises in the same industry.

(4) Cooked plate: The cooked food business mainly adopts the sales mode of franchise chain and OEM, and a few packaged goods pass through terminal supermarket stores (supermarket suppliers).

And online e-commerce sales; The customers of the company’s conditioning products include direct selling customers and distribution customers. The direct selling customers are mainly catering industry, and the distribution customers are mainly wholesale and supermarket suppliers.

Third, the core competitiveness analysis

1. China is a large-scale poultry food leading enterprise with obvious scale advantages.

Yike Food is one of the large-scale agriculture, animal husbandry and food enterprises in China. Based on the advantages of capital, technology and scale, the company has become a leading poultry food enterprise in China, with significant scale advantages.

With the increasing attention of the country and people to food safety, the standards of food hygiene and animal and plant inspection and quarantine are gradually improved. As a large-scale enterprise with multiple business links, the company can implement the whole process control of food safety in feed production, slaughtering and food processing, and effectively detect and technically control epidemic diseases and product quality and safety.

As one of the fastest growing and most efficient enterprises in the poultry industry in China, the company will continue to consolidate its market position in the next three years, and maintain and strengthen its scale advantage by strengthening its marketing ability and expanding its market share.

2. Outstanding quality and brand value, and continuous leadership.

The company attaches great importance to product quality and has a good quality control system. Based on the company’s good product quality, the products produced by the company have high popularity and reputation in the whole industry, and thus a relatively complete enterprise sales network is established, with long-term cooperative dealers and stable consumer groups. At present, the company has been recognized by many large-scale partners in the market, and it is the main product of new retail such as Ding Dong grocery, Boxed Ma Xiansheng, and an important partner of large-scale catering such as Haidilao and Pizza Hut, and meets a large number of stable demands of well-known brands such as Anjing, Shuanghui, Zhou Heiya and Juewei, benefiting customers with excellent brand ability, channel development and compounding ability, and promoting the company’s new round of profitability improvement.

3. Market competitive advantage: the industrial structure layout with great tension.

Yike Food’s main business covers many links in the industrial chain of meat and poultry industry, among which poultry slaughter business occupies a major position, and slaughter processing is a key link in the transformation from means of production to commodities. With the advantage of slaughter, the upstream (feed, seedlings, breeding, etc.) can be integrated, the quality can be improved and the cost can be reduced, and the market side can develop the deep processing business of conditioning products and cooked food with the help of channel advantages, thus improving the company’s gross profit.

At the same time, the regional layout of Yike industry follows the principle of "being close to the market and resources", while Shandong and Jiangsu are the dominant producing areas of China white feather meat poultry. Yike base radiates the three most important market areas in China, namely, Beijing-Tianjin-Hebei, Yangtze River Delta and Pearl River Delta, with obvious geographical advantages.

4. Experienced founding team and talent advantages

The management has worked in the meat and poultry industry for more than 15 years on average, and has rich industry experience and profound industry insights. They not only have strong ability to grasp market opportunities and adapt to market changes, but also have good foresight on the market development trend of the meat and poultry industry. In addition, through years of accumulation, the company has also trained a large number of junior and middle-level management cadres in slaughter processing technology, feed formula technology, breeding technology, disease prevention technology, conditioning and cooked food processing technology, information technology and marketing. Through organic coordination and running-in collocation, all kinds of outstanding talents make the company’s comprehensive management level get the maximum play.

5, always committed to the development strategy of industrial technology research and development and application.

As a leading growth enterprise in agriculture, animal husbandry and food industry, Yike Food conforms to the development of national agriculture and science and technology strategy, meets consumers’ growing expectations for food safety, health and speed, and meets customers’ demand for efficient and stable supply chain. The company attaches importance to driving enterprise development with scientific and technological innovation, and lists "science and technology benefiting customers" as a major development strategy. Great achievements have been made in intelligent breeding, genetic breeding, modern equipment, safety traceability system construction, pollution control of livestock and poultry breeding, technical system construction of waterfowl industry, etc. It has successively won many national, provincial and ministerial honorary titles such as "National Demonstration Zone for Intelligent Breeding of Poultry" and "Demonstration Enterprise for Safe and Healthy Meat Food", and has established "National Engineering Laboratory for Pollution Control and Recycling Technology of Livestock and Poultry Breeding" and "Suqian Comprehensive Experimental Station for National Waterfowl Industrial Technical System". By the end of the reporting period, the company had 101 valid patents, of which 24 were invention patents, 73 were utility model patents and 4 were design patents.

Fourth, the main business analysis

1. Overview

During the reporting period, affected by the epidemic situation, the relationship between supply and demand, and the increase in food prices, the meat and poultry industry as a whole was relatively depressed. However, in the long run, with the changes of meat demand and supply structure, consumption concept and consumption habits, poultry meat will be favored by more and more consumers because of its high protein, low fat, low cholesterol and low calorie, and there will be greater room for growth in poultry meat consumption in the future.

Faced with the repeated epidemic situation at home and abroad and the complicated economic situation, all employees of Yike Food worked together in Qi Xin to overcome the difficulties and not be afraid of challenges, and the company as a whole maintained healthy and steady development. In 2021, the company realized an operating income of 16,414,226,300 yuan, an increase of 14.05% over the same period of last year; The net profit attributable to shareholders of listed companies was 117,135,300 yuan, down 18.75% from the same period of last year.

In 2021, in the face of the epidemic situation in COVID-19 and the complicated economic situation at home and abroad, the company actively responded to the national rural revitalization strategy, continued to promote scientific and technological innovation and healthy industrial development, and ensured the people’s consumption and supply of safe and healthy poultry products, and focused on the following aspects:

(1) The company always adheres to the business policy of "customer first, quality first", integrates the upstream and downstream of the industrial chain, continuously optimizes the resource structure, implements the brand promotion strategy, subdivides the market, and steadily increases the market share.

(2) The company’s new project, Shandong Zhongke Food Industrial Park Cooked Products Construction Project, expanded poultry cooked food project with an annual output of 20,000 tons, and Xuzhou Runke Food Co., Ltd.

Meat and poultry processing projects were completed and put into operation one after another in 2021, especially with the commissioning of two cooked deep processing projects, the company’s production capacity and delivery capacity of cooked food and cooked products in sauce and halogen products were greatly improved, and the ability to serve customers was also improved; In the future, with the release of production capacity of new projects, the company’s market share and market share will be further improved.

(3) During the reporting period, the company continued to push forward the strategy of "benefiting customers digitally" and further improved the company’s operational efficiency through digitalization of business and management.

(4) During the reporting period, the domestic epidemic situation was repeated and the situation was still grim. The company always paid attention to the epidemic situation. As an enterprise for ensuring people’s livelihood and supply, the company actively assumed the social responsibility of ensuring operation and supply, formulated emergency plans and production protection plans for epidemic prevention and control, increased the implementation of daily disinfection measures, and cooperated with local governments in epidemic prevention and control.

At the same time, ensure safe production and operation and stable supply of poultry meat market.

(5) Continue to develop the functions of education and scientific research, innovate the recruitment and training mode of talents through cooperation with scientific research institutes and universities, and create a model to attract and train outstanding talents.

Innovate the platform, improve the process ability and value creation ability of all links in the company’s value chain, and continuously enhance the company’s core competitiveness.

(6) During the reporting period, the key points and highlights of each link in the company’s industrial chain:

Breeding poultry plate: the construction of production technology system, the popularization and application of automation equipment at breeding poultry breeding end, and the production quality index is at the leading level in the industry; Feed sector: feed bulk raw material procurement ensures the quality and stable supply of feed bulk raw materials by deepening cooperation with large state-owned suppliers, and improves the quality and supply stability of OEM customized feed by cooperating with excellent enterprises; Slaughtering plate: In 2021, the production side further strengthened balanced production and regional coordination, and the overall balance, raw material supply coordination and order distribution efficiency improved significantly, the ability and speed of responding to the market improved significantly, and the quality and delivery capacity of products improved steadily; At the same time, through innovation and improvement, process standardization, research and development and application of automation equipment, process capacity and production efficiency have been significantly improved; The raw material side takes it as its responsibility to drive farmers to increase their income and get rich and help rural revitalization. Through the research, development, application and promotion of new technologies and equipment, it constantly breaks through the technical bottleneck of meat duck breeding; At the same time, actively explore a variety of ways to utilize manure resources, such as planting and breeding, and take the road of circular economy and ecological agriculture; Establish an effective fund guarantee and mutual assistance mechanism by using industrial finance and combining various cooperation modes.

Cooked plate: In 2021, the company gave full play to the advantages of the company’s industrial chain, guided by market demand, and relied on the advantages of existing channels to continuously strengthen the "business-research-production-sales" value creation process, keep up with the market demand, constantly innovate and enrich the research and development and production of cooked food and prepared products of sauce and halogen products, and carry out online and offline cooperation with e-commerce new retail formats such as () and Baicaowei, as well as "Love Duck" own brand franchise chain.

V. Prospect of the Company’s Future Development

(A) the company’s future development strategy

The company’s overall development strategy: based on the principle of "customer first, quality first", the concept of comprehensive digitalization and integrated operation logic and strategy, we will maintain growth, and at the same time realize the comprehensive improvement of product quality, service quality, management quality and talent quality, thus releasing production capacity and profitability.

(II) The company’s annual business plan for 2022

In 2022, under the leadership of the board of directors, the management of the company will seize the opportunity, focus on the development of its main business, improve its ability of continuous innovation, improve its management level, actively promote the business development and the growth of its operating performance, realize the sustainable development of the company, and focus on the following aspects:

1, comprehensive management system construction

In order to continuously meet the expectations and requirements of customers, investors and interested parties, and realize the long-term success of the company, Yike Food promotes the construction of integrated management system, continuously improves the functions of existing organizations according to the company’s medium-and long-term strategy, and focuses on process improvement, process standardization and top-down target task responsibility system operation, so as to enhance the efficiency of the whole value chain, build profitability and comprehensively improve the company’s operating quality.

2. Business plan

The company will focus on the development of its main business, expand its production capacity through the implementation of the initial public offering of shares, expand its production scale and strengthen its sales team through technological upgrading, and continuously increase its market share and consolidate its market position. At the same time, the company will continue to increase the proportion of high value-added channels, further increase the proportion of sales of cooked and customized fresh products, develop the market through innovative means and new products in market development, increase market share, and continuously optimize product structure and increase the proportion of mid-to high-end products, so as to continuously enhance the company’s profitability.

3. Brand plan

Brand strategy is a necessary condition for enterprises to achieve rapid development. The company will continue to improve the layout of marketing network, expand the marketing team, strengthen the depth and breadth of customer coverage, adjust the organizational structure and responsibilities in time according to business needs, deepen customer needs and enhance customer satisfaction; At the same time, through the rational allocation of market resources, we will create representative high-quality products and further enhance brand influence.

4. Talent plan

Doing a good job in human resources construction of the company is an important guarantee for the company’s strategy and business development. According to the needs of strategic development, the company will strengthen internet education, train, tap and improve the ability of employees, especially in the medium and long term, do a good job in building the team of four types of talents, such as breeding technical talents, automation technical talents, management talents and market development talents, and do a good job in pragmatic human resources foundation for implementing the company’s development strategy and development plan.

5, digital plan

In 2022, the company continued to list "digital benefits to customers" as a major development strategy. According to the company’s comprehensive management system, it closely integrated digitalization with management reform, business transformation and process reorganization, and guided by business needs, integrated processes with the Internet, comprehensively promoted the company’s digital transformation, provided informationization and networking support for the company’s overall operation, and provided long-term support for the company to realize business integrated information management.

6. Improve corporate governance.

The company will take the opportunity of initial public offering of shares and listing on the Growth Enterprise Market, strictly follow the requirements of the Company Law, Rules for Listing of Shares, Guidelines for Standardized Operation and other laws, regulations and normative documents, improve the construction of the company’s internal control system, continuously improve the corporate governance level, and form a corporate governance structure that performs its duties, restricts each other and regulates its operation; Promote the scientific and institutionalized decision-making on major issues; Strengthen information disclosure and investor relations management, improve the transparency of the company’s operation, and improve the company’s operation efficiency while improving the existing corporate governance structure.

(3) Possible risks and countermeasures

1, animal epidemic and other natural disaster risks

The company’s main business scope covers many links in the industrial chain of meat and poultry industry, and the epidemic situation of poultry animals is one of the main risks faced by the company in its production and operation. The impact of animal epidemics such as bird flu on the company is mainly reflected in:

(1) If a serious animal epidemic occurs in the surrounding area of the company or nationwide in the future, the poultry in the epidemic area will be destroyed, the supply of raw materials will be insufficient or the quality of raw materials will be damaged, and the price of raw materials will fluctuate greatly;

(2) The emergence of a large-scale epidemic will reduce the desire of end consumers to buy poultry meat, resulting in a decrease in the market demand for the company’s products;

(3) If an animal epidemic occurs in the company’s own subordinate farms, the company’s autotrophic poultry will be destroyed and the company will suffer asset losses.

In addition, if major natural disasters, such as severe climate change and insect pests, cause a large reduction in agricultural production, the costs of feed production and poultry breeding will rise sharply, and the company’s procurement costs will increase; Severe weather such as rainstorm, blizzard and hail will bring inconvenience to road transportation and increase the transportation cost of materials and products.

In recent years, the company has promoted large-scale and standard farms, equipped with specialized breeding technical service personnel, and strictly implemented epidemic prevention measures to help aquaculture owners increase their ability to fight animal epidemics; At the same time, the company has established emergency plans for natural disasters, and the large-scale and standardized farms have also increased their ability to resist the risks of natural disasters compared with the breeding sheds built by the owners themselves.

2. Food safety risks

Food safety has always been the top priority of meat processing enterprises. In recent years, the state has promulgated a series of laws and regulations, such as People’s Republic of China (PRC) Food Safety Law, People’s Republic of China (PRC) Food Safety Law Implementation Regulations, and People’s Republic of China (PRC) Agricultural Products Quality Safety Law, to further strengthen the social responsibility of food producers and risk control and restraint measures, and to increase the punishment of offenders. Although the company has established strict quality control systems and standards, if food safety accidents or quality problems occur due to poor quality control and inadequate management, it may adversely affect the company’s reputation and operation.

To this end, the company continues to strengthen food safety in the first place, and constantly strengthen supervision over food safety through various procedures such as feed and drug control, breeding process supervision and acquisition supervision, and strictly implement food safety in all aspects of production and operation, so that safe, secure and green customer-friendly products can enter thousands of households.

3. Environmental protection risks

The pollutants produced in the company’s production mainly include waste water, waste gas and a small amount of solid waste such as feces and sludge. In addition to the company’s own production and operation activities, the company’s daily business relies on farmers as the main source of raw materials supply for the slaughter plate. If the environmental protection policies of the state and local governments are adjusted, the environmental protection requirements for the breeding and slaughtering industries will be further improved, which will increase the production costs of the company and farmers in purchasing and building environmental protection facilities, paying sewage charges and other operating expenses, and have an impact on the profitability of the company.

In 2013, the State Council promulgated the Regulations on the Prevention and Control of Pollution from Large-scale Livestock and Poultry Farming, which clearly defined the prohibited areas, and all the farms in the prohibited areas were moved or closed by themselves within a time limit. If the local government further adjusts the land planning and redefines the no-breeding areas in the future, the farms of the company’s farmers will face the risk of moving or closing within a time limit, which may adversely affect the company’s production and operation.

To this end, the company introduced new equipment, new technologies and new processes to improve the company’s environmental governance capabilities. The company insists on constantly promoting environmental protection knowledge to employees, improving their awareness of environmental protection, and achieving the sustainable development goal of harmonious coexistence between enterprises and the environment through the joint efforts of all employees.

4. Risk of price fluctuation of products and raw materials

The company’s main products are duck products, chicken products, feed, ducklings, chickens, cooked food and conditioning products, and the main raw materials include hairy ducks and chickens. The company’s products and raw materials cover many links in the industrial chain of poultry breeding industry, and their market prices change with the supply and demand of each link in the industrial chain, showing certain fluctuations.

China’s poultry farming industry has a low degree of large-scale farming. Under the background of market structure that small-scale farmers account for the main part of the breeding population and the degree of large-scale farming needs to be improved, it is easy to cause large fluctuations in the market supply level, so the prices of duck products, chicken products, duck seedlings and chicken seedlings may change greatly in a certain period of time. At the same time, due to the different links in the industrial chain, the prices of the company’s main raw materials, duck and chicken, also change with the relationship between supply and demand. Although there is a certain linkage effect between the prices of products and raw materials, there are certain uncertainties in the price transmission time and the range of change, which will have a certain impact on the company’s profitability.

Different from a single business company, the company’s main business scope mainly covers many links in the industrial chain of the meat and poultry industry. The company’s products have the characteristics of the whole industrial chain, which can moderately alleviate the impact of the downward price of a single product on the company as a whole.

5, the risk of fluctuations in operating performance

Influenced by the change of supply and demand, feed price, epidemic situation and other factors, the prosperity of poultry industry presents certain fluctuation characteristics. In recent years, although the company’s business scale has been expanding, the company’s operating performance has also fluctuated due to the fluctuation of the industry, especially during the rotation of the industry from the rising cycle to the falling cycle, the company’s operating performance will drop sharply, and it will be at a low level during the relatively low valley. Taking 2018-2020 as an example, 2018 and 2019 are the upward cycles, especially in 2019, when the industry demand is large, the high gross profit mobilized the enthusiasm of farmers and stimulated the increase of industry capacity in a short period of time. In 2020, due to the rotation of industry cycles, the net profit attributable to shareholders of the parent company after deducting non-recurring gains and losses decreased by 65.59% compared with 2019.

From 2019 to 2021, the company’s operating income was 15.554 billion yuan, 14.392 billion yuan and 16.414 billion yuan respectively, and the net profit attributable to the parent company after deducting non-recurring gains and losses was 363 million yuan, 125 million yuan and 105 million yuan respectively; From the perspective of periodic changes in the industry cycle, 2019 is an upward cycle, and the overall operating performance of the industry is good. The high gross profit has aroused the enthusiasm of farmers and stimulated the increase of the industry’s production capacity in a short period of time. In 2020, due to the rotation of the industry cycle, the net profit attributable to shareholders of the parent company after deducting non-recurring gains and losses decreased by 65.59% compared with 2019. In 2021, the net profit attributable to shareholders of the parent company after deducting non-recurring gains and losses decreased by 15.89% year-on-year. Due to the periodic changes in the relationship between supply and demand in the industry where the company is located, the company’s performance has dropped significantly in the down cycle.

The company’s main business scope mainly covers many links in the industrial chain of meat and poultry industry, and its products have the characteristics of the whole industrial chain. Based on the characteristics of the company’s products, in terms of operation and management, on the one hand, all sectors are independent of each other and have the ability to operate independently; On the other hand, because they belong to the industrial chain of meat and poultry industry, there is a certain degree of upstream and downstream linkage between the business sectors. By well managing the upstream and downstream linkage of the industrial chain, the company can obtain higher synergy, thus effectively resisting the business risks of a single business link in the industrial chain. In the future, the company will continue to strengthen the industrial chain layout, reduce the performance fluctuation caused by a single business link and increase profitability.

6. The impact of repeated epidemics on the company’s production and operation

Since 2020, the limited transportation caused by the epidemic and the closure of centralized places such as restaurants have had a certain impact on the company’s raw material supply, operating rate, sales scale and product market price. However, with the introduction and implementation of a number of policies to protect people’s livelihood and supply and support enterprises to return to work, the company’s procurement and production will gradually return to normal levels. Although the situation of epidemic prevention and control in China continues to improve, if the epidemic continues to spread in local areas or other countries and cannot be effectively controlled globally, it will still have an adverse impact on the macroeconomic situation and consumer demand, thus causing certain uncertainty to the company’s operating performance in the next few years.

To this end, the company will pay close attention to the development of the epidemic, make a response plan in advance, and actively deal with and respond to the risks and challenges it brings.

7. Risk of performance decline

In 2020, due to the impact of the epidemic on the daily consumption of residents and the market price of all links in the poultry meat industry chain, and the cyclical fluctuation of the poultry seedling market, the company’s operating performance in 2020 declined compared with that in 2019, of which the net profit attributable to shareholders of the parent company decreased from 363 million yuan in 2019 to 125 million yuan in 2020, a decrease of 65.59%. In 2021, due to the decline in the profitability of the chicken products sector, the net profit attributable to shareholders of the parent company after deducting non-recurring gains and losses decreased by 15.89% compared with the same period in 2020.

Affected by the change of supply and demand in each link, the market price of different links in the poultry meat industry chain still fluctuates periodically. The company’s products and raw materials cover many links in the industrial chain of poultry breeding industry, and the change of market price still makes the company’s performance fluctuate or decline.

With the release of production capacity of fundraising projects, the company’s comprehensive competitiveness will be further enhanced, which is conducive to the further improvement of overall profitability.