The price increase in April increased, and raising pigs in a single month may be profitable
The company's sales volume increased in April, and the rise in pig prices was compounded by improvements in the company's breeding performance. We judge that the company may have made a profit of 0.07 to 209 million yuan from raising pigs in April alone. We maintain our profit forecast. We expect the company to achieve net profit of 355 million yuan, 1,597 million yuan, and 2,066 billion yuan in 24-26, and BVPS of 8.67, 11.46, and 15.14 yuan respectively. Referring to the average valuation value of comparable companies in 2024, considering the company's financial stability and outstanding farming cost advantages, the company was given 5.49XPB in 2024, corresponding to a target price of 47.60 yuan, to maintain a “buy” rating.
Sales volume increased and prices increased in April, raising pigs in a single month may be profitable
The company released 1.71 million pigs in April, +70% year-on-year, of which 159,000 were fat pigs, accounting for 93%.
The average sales price of fat pigs was 14.58 yuan/kg, +4.8% year-on-year and +4.1% month-on-month. The estimated weight of fat pigs is 121 kg/head, which is not much different from March. Based on the company's customs records on April 26, we estimate that the company may have made a profit of 0.07 to 209 million yuan from raising pigs in April alone, and that fat pigs may have made a profit of 40 to 50 yuan. The rise in pig prices is compounded by the company's improved breeding performance and falling feed costs. We judge that the company has achieved its first monthly pig farming profit since 2023.
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.
Excellent historical operating performance; currently the cost is the lowest among listed pig companies
The company's cost expansion effect is remarkable. The comprehensive cost of 2024Q1 pig farming is about 14.5 yuan/kg, down 1.7 yuan/kg from 16.2 yuan/kg in 2023. As the impact of subsequent high-priced raw materials and high-priced outsourced pig fry on costs gradually weakens, we expect that the company's April costs may still have room to decrease, or reach 14.2 yuan/kg. The company has excellent historical operating results, an advantageous pig breeding system+professional team+high level of health management. The company's breeding costs continue to rank in the first tier of the industry, and April is estimated to be the lowest among listed pig companies. Profit accumulation and steady expansion. As of 24Q1, the company's balance ratio was only 29%, which is also the lowest level for listed pig companies.
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.