Affected by the Spring Festival, the average monthly sales volume of pig companies listed in January-February declined, but due to a recovery in low prices and weight gain, individual losses are expected to decrease.
The Zhitong Finance App learned that China Post Securities released a research report saying that due to the influence of the Spring Festival, the average monthly sales volume of pig companies listed in January-February declined, but prices rebounded from low levels and weight gain, and single losses are expected to decrease. At the same time, from September 2023 to February 2024, the number of newborn piglets continued to decline, which means that the supply of fat pigs will also decrease after 5 months (corresponding to the second half of 24 years). Although supply has declined, there is no obvious advantage on the demand side, and there is currently a lot of pressure to remove frozen meat from storage. It is expected that the rise in pig prices in the second half of the year will be very limited. Currently, industry company valuations are at the bottom of history, which is a good time for the layout section on the left. It is recommended to choose targets with outstanding cost advantages, and then take into account growth.
Related targets:
1) The cost advantage of leading companies is relatively obvious, and listing is more certain. Recommended attention: Makiyuan Co., Ltd. (002714.SZ), Wen's Co., Ltd. (300498.SZ).
2) Small and medium-sized enterprises are growing faster, and there is more room for cost reduction. Recommended attention: Superstar Agriculture and Animal Husbandry (603477.SH), Huatong Co., Ltd. (002840.SZ), Tiankang Biotech (002100.SZ), and Tang Renshen (002567.SZ).
The main views of China Post Securities are as follows:
Pig prices rebounded from a low level, and sales declined seasonally
Affected by the Spring Festival, the average monthly sales volume of pig companies listed in January-February declined, but prices rebounded from a low level and weight gain, and individual losses are expected to decrease:
Volume: Month-on-month decrease, year-on-year increase. From January to February 2024, the total monthly sales volume of 17 listed pig companies was 13.64 million heads and 11.11 million heads respectively, which was -14% and -18.5%, respectively, showing a month-on-month decline, mainly affected by the Spring Festival. Judging from the cumulative volume, a total of 24.74 million heads were released in January-February, an increase of 10.1% over the previous year. The number of listed companies listed still increased significantly compared to the same period last year: on the one hand, February this year was one day longer than last year, and on the other hand, the production capacity of listed companies increased.
Price: Rebound at a low level. From December 2023 to February 2024, the average monthly commercial pig prices of 14 pig companies were 13.64 yuan/kg, 13.69 yuan/kg, and 13.98 yuan/kg. From the fourth quarter of '23 to mid-January '24, pig prices continued to fall during the peak season until January 12, '24. After falling to the lowest point in the current cycle, pig prices began to rebound weakly. Moreover, after the Spring Festival, pig prices did not fall but rose, showing a certain degree of anti-seasonality. The main reason for the rebound in low pig prices was due to the acceleration of production capacity removal in the fourth quarter of last year, the supply of large pigs in the market decreased, and there was a clear sense of reluctance to sell on the farming side.
Weight: Significant weight gain. From December 2023 to February 2024, the average weight of pigs released by the 10 listed companies was 113.11 kg/head, 113.9 kg/head, and 116.1 kg/head, respectively. Affected by the non-plague in the north and cautious expectations, there were many large pigs from the breeding side in the fourth quarter of '23, resulting in a low supply of large pigs at this stage.
Short-term production capacity continues to decline, and pig prices may rise in the second half of the year
The short-term rise in pig prices did not affect the decline in production capacity: 1) After 23 years of large losses, the cash flow of many companies in the industry is already extremely tight. If off-season losses increase by one step in March-April this year, it may accelerate the exit of enterprises; 2) Judging from the situation in the north at the end of 23, the current virus situation is more complicated than in previous years. With the arrival of spring, southern farmers will face the test of disease prevention and control; 3) Currently, the industry generally expects to be cautious, and some companies have lowered their listing targets for 24 years. 4) Annual report data or further verification of the reduction in production capacity.
Supply declined in the second half of the year, and pig prices are expected to rise to the profit range. Since December '22, the industry's production capacity has continued to decline. Especially after the fourth quarter of '23, the removal accelerated markedly.
At the same time, from September 2023 to February 2024, the number of newborn piglets continued to decline, which means that the supply of fat pigs will also decrease after 5 months (corresponding to the second half of 24 years). Although supply has declined, there is no obvious advantage on the demand side, and there is currently a lot of pressure to remove frozen meat from storage. It is expected that the rise in pig prices in the second half of the year will be very limited.
Risk warning: the risk of animal diseases and the risk of fluctuating raw material prices.