Raising pigs and chickens was both profitable in April, and the cost improvement exceeded expectations

In April, the number of pigs sold by the company increased, and prices rose. The rise in pig prices and the recovery in chicken prices combined with improvements in the company's breeding performance. We judge that the company may have made a profit of 90 to 240 million yuan from raising pigs in April alone, and that yellow chicken may have made a profit of 103 to 205 million yuan. We maintain our profit forecast. The company's net profit for 24-26 is 39.4/134/13.1 billion yuan, and the estimated BVPS is 5.56/7.37/9.25 yuan, respectively. Referring to the comparable company's 24-year 4.31X PB average (Wind's consistent expectation), considering the company's excellent cost management, we gave the company 4.59 times PB in 24 years, with a target price of 25.52 yuan, maintaining a “buy” rating.

Cost reduction & price increase. In April, pig farming and chicken farming were both profitable 1) The company released 2.48 million pigs in April, +18% over the same period; we estimate that fat pigs weighed 124 kg/head, an increase of about 1.6 kg over March. The average sales price of commercial pigs was 15.2 yuan/kg, +5.7% year-on-year and +3.1% month-on-month. The rise in pig prices compounded the decline in costs. We estimate that in April, the company may have achieved a profit of 90 million yuan to 240 million yuan, with an average head profit of 35 yuan to 97 yuan, reversing losses from year to month. 2) In April, 93.64 million yellow chickens were released, down 6.4% year on year and 4.0% month on month; the average sales price of yellow chicken was 13.0 yuan/kg, -0.2% year-on-year and +1.8% month-on-month; we estimate that the yellow chicken business achieved a profit of 103 to 205 million yuan in a single month, and a single feather achieved a profit of 1-2 yuan, reversing the year-on-year loss.

The market on the right side of the pig cycle starts, and pig prices may rise or fall easily in the future

We judge that pig prices have now entered the right side of the cycle. Considering: 1) the continuous losses in the pig breeding industry from 2023 to now and the continued decline in pig supply pressure in 2024, 2) pork consumption will gradually increase in May every year; 3) the pressure to release pigs in the early stages has been exhausted, and new pressing/secondary education groups are waiting to enter the market; 4) the total number of listed pig companies will be on the rise or difficult to increase in the total number of listed pig companies in 2024 It's hard to rise or fall. Judging from historical experience, in the pig cycle reversal market, the stock price increase phase driven by rising pig prices on the right is more flexible. Among them, pig companies with excellent costs and a high degree of cash out may also break out of another wave of stock price increases driven by performance realization. It is recommended to actively lay out the pig breeding sector.

Production performance is steady, moderate and positive, and the company's farming costs have expanded significantly

Since the beginning of the year, the company's production performance has been stable, and the cost control of pig farming is ideal. The comprehensive cost of pig breeding in April was 14.4 yuan/kg. It also decreased by 0.4 yuan/kg on the basis of 14.8 yuan/kg in March 2024, mainly due to significant epidemic prevention and control effects, compounded by factors that reduced the price of feed ingredients. We previously predicted in our forward-looking report that the full cost of pig breeding for 24Q1 was 15.6 yuan/kg; in fact, it was 15.2 yuan/kg. The company's breeding costs in April expanded once again at the low level of 24Q1 and March, and once again exceeded our expectations. The company's broiler breeding performance is leading. The full cost of selling hairy chickens in April was about 12.2 yuan/kg, down 0.4 yuan/kg from March.

Risk warning: the number of pigs released falls short of expectations, pig prices fall short of expectations, repeated non-plague outbreaks, large-scale animal disease outbreaks, the pace of expansion does not match market demand, etc.