After four years, minsheng bank (600016.SH) has finally welcomed an increase in shareholding from its former largest shareholder.

On November 18, new hope liuhe investment, affiliated with Liu Yonghao, plans to increase its shareholding in minsheng bank.

In addition, the shareholding of minsheng bank held by new hope liuhe investment, which is controlled by new hope (000876.SH), and southern hope industry, which is controlled by new hope group, has reached 4.96%. After this round of shareholding increase, the shareholding ratio of the entity under Liu Yonghao will exceed 5%, reaching the threshold for shareholding disclosure.

As one of the founding shareholders, Liu Yonghao's presence has always been significant behind the fluctuations in minsheng bank's shares.

At the beginning of A-share listing, the three major shareholders of 'new hope system,' 'orient group,' and 'pan-ocean system' formed a competitive landscape, with Liu Yonghao's new hope investment ranking as the largest shareholder, and he was also elected as vice chairman.

From 2014 to 2015, represented by 'anbang system,' insurance capital entered the market. Liu Yonghao withdrew at a critical moment and continued to reduce his shareholding over the following years, maintaining it at around 4.5%.

From 2019 to 2020, Liu Yonghao increased his shareholding in 34 increments under his personal name, bringing the 'new hope system' shareholding ratio to the threshold of 4.96%.

After that, Liu Yonghao served as vice chairman of Minsheng Bank for a long time, but no significant actions were taken regarding equity; forces that once competed with him such as the "Ocean Group" and "Anbang Group" have also been submerged by the flow of time.

The new round of shareholding seems to signify that the "New Hope Group" is increasing its confidence in Minsheng Bank.

Once regulatory approval is completed, Minsheng Bank will have its second A-share shareholder with a shareholding ratio exceeding 5%, in addition to China Life Insurance.

The dilemma of the "pork cycle".

From the perspective of the timing of the increased shareholding, the current shareholding by the "New Hope Group" is still under the pressure of the previous "pork cycle."

As the "king of fodder," Liu Yonghao, who leads New Hope, realized the low profitability in the fodder industry and invested 0.616 billion yuan in 2016 to acquire 70% equity of Shaanxi Benxiang Agriculture, forcefully entering the pig farming market.

At the end of 2018, the pig farming industry, under the outbreak of African swine fever, began the "strongest pig cycle in history."

During this period, the "new rich" in pig farming, New Hope, expanded its debt, simultaneously enjoying the sweet benefits of the boom while also sitting on the cold bench at the bottom of the cycle.

In the first half of the cycle, new hope liuhe welcomed the peak performance after its listing, achieving nearly 10 billion yuan in profit from 2019 to 2020.

Subsequently, the expansion accelerated, with the output reaching 17.68 million heads in 2023, more than five times growth compared to 2019.

In 2021, the "pork cycle" entered its second half, with supply exceeding demand and hog prices declining.

In 2021, new hope liuhe incurred a loss of nearly 9.6 billion yuan, and profit performance thereafter was lackluster; after selling its white feather poultry and food business in 2023, it barely turned a profit, with profit only at 0.153 billion yuan in the first three quarters of 2024.

As profits came under pressure, the debt burden from the expansion cycle continued to loom.

In 2023, new hope liuhe's debt-to-asset ratio " surged " to 72.28%, which is 10 percentage points higher than the industry average; interest expenses alone had skyrocketed to 2.047 billion yuan, eight times the profit of the same year.

Under pressure, new hope liuhe is financing through loans from banks, issuing bonds, and private placement.

For example, in November 2023, a private placement issued 1.364 billion shares, raising no more than 7.35 billion yuan for security upgrades in pig farms, acquiring minority stakes in holding subsidiaries, and repaying bank loans.

As of the end of the first half of the year, short-term loans, non-current liabilities due within one year, and long-term loans were 19.65 billion yuan, 9.399 billion yuan, and 24.753 billion yuan respectively.

In contrast, the only 10.808 billion yuan in cash is insufficient to cover the funding pressure.

Entering 2024, the price of live pigs has shown a significant rebound.

The price of commodity pigs sold by new hope liuhe rose from 13.3 yuan to 20.13 yuan per kilogram from January to August.

In October, the price of commodity pigs fell to 17.37 yuan per kilogram, an increase of 16.50% compared to the same period last year, but a decrease of 7.66% month-on-month.

Analyst Chen Xueli from Kaisheng Securities stated that from the perspective of supply and demand, the supply of pork in the fourth quarter of this year is expected to be lower than the same period last year, which will support pork prices; however, with the recovery of live pig supply in the first half of next year and entering the off-season for pork consumption, pork prices may face further pressure.

Why increase investment in Minsheng Bank.

Although Minsheng Bank's performance in recent years has not been outstanding among peers, for New Hope, which is deeply mired in the latter half of the "pig cycle", it remains a rare ray of hope.

From historical performance, the profit contributed by Minsheng Bank's equity is far more stable than New Hope's main business.

Even during the peak performance in 2019, the indirect 4.18% equity held by New Hope brought in 2.247 billion yuan in revenue, accounting for 36.36% of the company's net income.

Afterward, New Hope did not disclose the specific earnings from the investment in Minsheng Bank year by year, but estimated investment income is likely to maintain around 1 billion yuan.

In the first half of 2024, New Hope's investment income, "primarily confirmed by using the equity method for holding Minsheng Bank shares", has exceeded 1 billion yuan.

Moreover, New Hope is indeed one of the "founding pioneers" of Minsheng Bank.

Although the capital map spans various fields such as agriculture, animal husbandry, dairy industry, and finance, Liu Yonghao still regards the investment in Minsheng Bank as one of "the two opportunities grasped accurately in his life."

In 1996, new hope liuhe chairman Liu Yonghao, together with orient group Zhang Hongwei, china oceanwide holdings group Lu Zhiqiang, china shipowners mutual assurance association Wang Yuguo, and giant group Shi Yuzhu, established minsheng bank.

Before going public, minsheng bank underwent over 20 equity transfers within a year and a half, with the final 'winners' concentrated in the 'new hope faction', 'oceanwide faction', and 'orient faction' trilateral forces.

Although Liu Yonghao is the largest shareholder of minsheng bank through new hope group, he was sidelined in the 2006 board of directors meeting during the vice chairman election, missing out on a board seat.

Subsequently, insurance funds such as china life insurance, 'anbang faction', and huaxia life insurance gradually entered the scene, escalating the equity struggle.

Liu Yonghao continued to serve as vice chairman but had adjusted his shareholding to below 4.5%.

Until 2019-2020, Liu Yonghao increased his shareholding in minsheng bank's listed in hong kong shares 34 times, raising the 'new hope faction's' shareholding ratio to the threshold for a stake.

After that, the 'new hope faction' lowered its flag and ceased further efforts to seek equity in minsheng bank until this recent shareholding.

Looking back from the present, neither new hope nor minsheng bank after 2020 can be considered smooth sailing.

New Hope struggled in the second half of the "pork cycle" after a brief highlight in net income, while Minsheng Bank gradually lost its aura as the "king of micro and small enterprises."

In 2020, when the risks of real estate companies were concentrated and exposed, Minsheng Bank's loan loss provisions surged by 18% to 97.637 billion yuan compared to the previous year, and profits plummeted by 36%, the largest decline among A-share listed banks.

Since then, Minsheng Bank has never been able to recover its vitality, with revenue and net income showing no improvement, while its PB (price-to-book ratio) has consistently ranked low among 42 A-share listed banks, reaching only 0.34 by the market close on November 19.

However, at present, Liu Yonghao still chooses to believe in Minsheng Bank once again.

Although profits are under pressure, Minsheng Bank's dividend yield remains high, ranking second among 42 A-share listed banks, reaching 8.32% at the market close on November 19, second only to the bank of nanjing.

Moreover, Liu Yonghao has a preference for financial equity, having frequently shared experiences of integrating production and finance, aiming to use finance as leverage to support the development of the real economy.

He once stated, "We are advocates of Minsheng Bank, also established a data financial company, and invested in insurance and securities."

The official website shows that "New Hope Group" has invested in Minsheng Bank, Xinnet Bank, china life insurance, and Huachuang Securities.

Although Liu Yonghao mentioned in a discussion with Yu Minhong in 2021, "I pay special attention to minimizing related-party transactions with the banks I manage, and I hardly ever take loans from Minsheng Bank."

However, under the financial pressure in recent years, related-party transactions seem to be unavoidable.

From 2022 to 2023, the loan balances from Minsheng Bank to enterprises associated with New Hope Liuhe were 0.854 billion yuan and 2.732 billion yuan respectively.