Incident description Young Eagle Farming and Animal Husbandry announced pig sales data for September. Incident Review Company sold 238,000 pigs in September, a decrease of 25% over the previous month, and achieved sales revenue of 443 million yuan, a decrease of 22% over the previous month. Among them, the sales volume of piglets was 77,800 heads, a decrease of 32.3%, an average sales price of 37.1 yuan/kg, a decrease of 3.41%, sales revenue of 82 million yuan, a decrease of 31.7%; pork pig sales were 152,900 heads, a decrease of 23.32%, accounting for 64% of total sales, an average sales price of 17.58 yuan/kg, a decrease of 4.51%, sales revenue of 302 million yuan, a decrease of 17.45%. From January to September 2016, the company's cumulative pig sales volume was 1.79 million heads, and the pig sales volume in the third quarter was 758,500, an increase of 34.4% over the previous month. The sharp decline in volume and price led to a month-on-month decline in sales revenue in September, and the results for the third quarter were in line with expectations. Since the number of pigs released by the company in August exceeded expectations by 56.3% month-on-month and reached 317,400 heads, after returning to normal levels in September, the number released declined somewhat month-on-month, but excluding August, we can see a steady increase in the number of pigs released, indicating that the negative impact of pig house reform during the company's model upgrade process is gradually being eliminated. In the third quarter, the company's pig sales volume increased 34.4% month-on-month, but the overall profit level is expected to decline month-on-month due to falling pig prices. Specifically, piglet sales in the third quarter were 249,500 heads, up 18.9% month-on-month, average sales price of 37.8 yuan/kg, down 15.7% month-on-month, pork pig sales volume 494,600 sets, up 48.9% month-on-month, average sales price 18.2 yuan/kg, down 10.4% month-on-month. Based on the full cost of piglets and pork pigs, the total cost of piglets and pigs is 28, 115 kg, and is expected to contribute 3.1 billion yuan in profit in the third quarter (estimated breeding contribution of 350 million yuan in the second quarter), in line with the company's overall performance. Expectations of 296 million yuan. The company's future outlook is as follows: 1. Against the backdrop of stricter environmental protection policies and cautious farmers' supplementary sentiment, it is expected that later breeding of sows will continue to hover at a low level or even lower than expected, and pig prices will be bullish until at least the second quarter of next year; 2. As the negative impact of pig house renovation gradually subsides with the gradual advancement of the Young Eagle 3.0 model, the pig house renovation and upgrade is expected to be completed by the end of the year. Overall, it is expected that the company's breeding costs will reach 2,70-5 million heads, and asset-light operations will also reduce the company's breeding costs, which is expected to reduce the company's breeding costs/60 yuan Head; 3. Company An agricultural industry fund and an e-sports industry fund have been set up. In the future, the company's integration of upstream and downstream mergers and acquisitions in the farming industry chain and extended expansion may accelerate. The e-sports sector may become an important puzzle for the company in the future, and the possibility of further integration of its e-sports and e-commerce resources is not ruled out. “Excess holdings” rating. We expect the company's 2016 and 2017 EPS to be 0.41 yuan and 0.45 yuan respectively, giving the company an “increase in holdings” rating. Risk warning: pig prices fell short of expectations, and the performance of the slaughter and processing and Internet sectors fell short of expectations.