The company publishes its 2022 semi-annual report. In the first half of the year, the operating income was 8.817 billion yuan, + 7.27% compared with the same period last year, and the net profit was-677 million yuan,-316.18% compared with the same period last year. In the second quarter alone, the company achieved an operating income of 4.662 billion yuan, + 7.78% compared with the same period last year, and a net profit of-325 million yuan,-0.13% compared with the same period last year.

The volume of production increased significantly in the first half of the year, and the optimization of operation and management advanced steadily. The sow production capacity of the company has been gradually released and the number of pigs has gradually increased. In the first half of 22, the number of live pigs was 2.3439 million, an increase of 86.14% over the same period last year, corresponding to the target of 5.5 million pigs for the whole year. In terms of production capacity, the company was able to reproduce 290000 sows at the end of July, an increase of 7.41% over June, laying the foundation for next year's growth. In terms of cost management, the company's current weaning cost of piglets is about 430 yuan per piglet, which is 20 yuan lower than the March level and the annual target is about 380 yuan per piglet. At the same time, the company is gradually adjusting the efficiency of fattening management, carrying out supporting layout around the sow farm, and concentrating resources on the team that has done a good job (the good area has already reached the level of 16 yuan / kg). Fattening costs should then have a larger reduction space, the company's goal is to reduce fattening costs to 16 yuan / kg by the end of this year and early next year.

With the increase of pig feed against the trend, the promotion effect of aquatic feed is obvious. In the first half of the year, the company achieved feed sales of 1.3217 million tons, an increase of 3.50% over the same period last year, of which pig feed sales were 772200 tons, an increase of 1.15% over the same period last year. Under the background of the decline of pig feed in the industry in the first half of the year, the company bucked the trend and fully demonstrated the competitiveness of pig feed. Poultry feed sales of 337500 tons, down 6.02% from the same period last year Sales of other materials (aquatic materials, ruminants and other materials) were 212100 tons, an increase of 37.19% over the same period last year. The company's aquatic materials business expanded vigorously, with obvious increments in the first half of the year.

The scale of slaughtering income is expanding, and animal insurance sales are under pressure. In terms of slaughtering food business, the company continued to expand its business areas. in the first half of the year, the company completed slaughtering of 352700 heads, an increase of 82.76% over the same period last year, 285700 heads of live pig trade, an increase of 1392.58% over the same period last year, and an income of 1.23 billion yuan, an increase of 76.39% over the same period last year. In terms of animal protection, the company's income in the first half of the year was 15.6543 million yuan, a decrease of 23.83% over the same period last year. The change was mainly due to the fact that the company's aquatic animal protection sales were affected by the Rain Water season in the relevant areas during the reporting period.

The average price of pigs in the industry remains high from July to August. We expect high pig prices or high pig prices in the second half of the year under the expectation of recovery in consumption, while other income increases in the first half of the year. Other income is expected to increase along with the volume of production, and the performance forecast is raised. It is estimated that the 22-24 net profit will be-1.66,16.82,507 million yuan respectively (original forecast-5.70,15.09,399 million) According to the previous comparable company valuation level, maintain 23 years 11xPE, target price 21.24 yuan, maintain the "buy" rating.

Risk hints: epidemic risk, pig price fluctuation risk, cash flow risk, raw material price fluctuation risk, food safety risk, other benefits related to pig subsidy are lower than expected risk.