In 2023, the agriculture, forestry, animal husbandry and fishery industry is still in a dormant period at the bottom of the cycle. The downturn in the aquaculture industry has also spread to upstream feed, animal protection and other sectors. Small and medium-sized enterprises are under pressure to clear up one after another, and the pace of industry integration and acquisitions is accelerating.
The Zhitong Finance App learned that Guolian Securities released a research report saying that the agriculture, forestry, animal husbandry and fishery industry is still at the bottom of the cycle in 2023, and the downturn in the aquaculture industry has also spread to upstream feed, animal insurance and other sectors. Small and medium-sized enterprises are under pressure to clear up one after another, and the pace of industry integration and acquisitions is accelerating. Entering 2024Q1, although the market has not clearly escaped the cold winter, there are also quite a few positive signs. Pig prices are not weak in the off-season, prices of bulk agricultural products continue to decline, and overseas demand for pet food is growing steadily, etc., and the pace of cycle recovery may gradually gradually slow down.
The main views of Guolian Securities are as follows:
Pig breeding: the industry lost significantly in 23 years, waiting for the 24-year cycle to reverse
According to Guolian Securities, a total of 145.987 million pigs were listed in the pig breeding sector in '23, an increase of 17.30% over the previous year. Driven by low pig prices, the overall revenue of the sector declined slightly by 1.48%, and the industry lost 13.6 billion yuan in '23. The bottom of pig prices has stabilized since February '24, and the industry continues to lose money but the margin has narrowed. The balance ratio of the 24Q1 sector declined slightly, but remained relatively high. Most listed pig companies contracted production capacity, the productive biological assets of 24Q1 listed pig companies fell 7.87% year on year, and projects under construction fell 21.64% year on year.
Broiler breeding: profitability improved in 24Q1, optimistic about the increase in broiler prosperity
According to Guolian Securities, the broiler breeding sector achieved revenue of 48.811 billion yuan in '23, an increase of 11.16% over the previous year; it achieved profit of 460 million yuan, a decrease of 35.81% over the previous year. The profitability of the 24Q1 broiler company improved, achieving net profit of 80 million yuan to the mother. The balance ratio of the industry has performed well, and most companies have the ability to continue to expand production and maintain a high listing growth rate. The productive biological assets of 24Q1 broiler enterprises increased by 2.15% year on year, and projects under construction increased by 32.08% year on year.
Feed: Cost pressure continues to ease, and gross margin is expected to gradually improve
According to Guolian Securities, the total revenue of feed companies in 2023 was 160.606 billion yuan, up 9.80% year on year, and total net profit from mother was 2,409 billion yuan, down 34.94% year on year. Major feed companies achieved net profit of 723 million yuan in 2024Q1, up 80.30% year on year and 1012.31% month on month. The average gross sales margin of major feed companies in 24Q1 was 10.13% in a single quarter, with year-on-month increases. Mainly, prices of raw materials such as corn and soybean meal fell, and the cost pressure on feed companies gradually eased.
Investment advice
The market on the right side of farming is still in its infancy, and continuity is still sufficient. Focus on Muyuan Co., Ltd. (002714.SZ), Wen's Co., Ltd. (300498.SZ), Superstar Agriculture and Animal Husbandry (603477.SH), and Shennong Group (605296.SH); focus on Tang Renshen (002567.SZ), Tiankang Biology (002100.SZ), and Xinwufeng (600975.SH). Seize this year's investment opportunities where the yellow chicken boom and pigs are recovering, and focus on recommending Lihua Co., Ltd. (300761.SZ). The boom in the white feather chicken industry has bottomed out. Focus is on Shengnong Development (002299.SZ), Yisheng Co., Ltd. (002458.SZ), Hefeng Co., Ltd. (603609.SH), etc. Prices of aquatic products are expected to gradually pick up, leading to an improvement in demand for aquatic feed. The focus is on Haida Group (002311.SZ), and focus on Guangdong feed (001313.SZ).
Risk warning: risk of animal diseases, risk of long-term low livestock and poultry prices, risk of fluctuating raw material prices, etc.