Profitability of raw pigs and yellow chicken accelerated in May, and costs fell again at a low level
In May, 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 in May alone, pig farming may have made a profit of 330 to 480 million yuan, and yellow chicken may have made a profit of 260 to 360 million yuan. The profit margin increased compared to April. We maintain our profit forecast. The company's net profit for 24-26 is estimated to be 39.4/134/13.13 billion yuan, and the estimated BVPS is 5.56/7.37/9.25 yuan, respectively. Referring to the comparable company's 24-year 4.29X PB average (Wind's consistent expectation), considering the company's stable farming performance and excellent cost management, we gave the company 4.59 times PB for 24 years and a target price of 25.52 yuan, maintaining a “buy” rating.
The price of pork and chicken rose and costs expanded again. In May, pork and chicken profits accelerated 1) The company sold 2.38 million pigs in May, +13.6% year-on-year, achieving sales revenue of 4.66 billion yuan, +27.2% over the same period; we estimate that fat pigs weigh 124 kg/head. The average sales price of commercial pigs was 15.8 yuan/kg, +10.5% year-on-year and +4.3% month-on-month. The rise in pig prices is compounded by the acceleration of the company's costs. We estimate that the company may have made a profit of between 330 and 480 million yuan in May and only 0.9 to 240 million yuan in April. The profit margin increased again, reversing losses over the previous year. 2) Sales of broilers in May were 94.22 million, +2.2% YoY, +0.6% month-on-month; the average sales price of yellow chicken was 13.8 yuan/kg, -1.3% YoY and +4.7% month-on-month; we estimate that the profit of the yellow chicken business was about 260 to 360 million yuan in a single month, compared to 1.0 to 210 million yuan in April. Yellow Chicken's profit increased both year on year and month on month.
The rise in pig prices started, supported by a contraction in supply in the medium term
As of June 5, the average price of pigs in the country was 18.4 yuan/kg, up about 3.6 yuan/kg from the bottom price of 14.8 yuan/kg at the end of April. Although the recent rapid rise in pig prices is partly driven by pressure and a sense of secondary education, the actual entry ratio between the two is not large. Essentially, it still comes from the accelerated degeneration of 23H2 sows that can breed. Considering that from January 2023 to April 2024, a total of 11.5% of sows were removed. The degeneration rate was deeper than in 2022. At the same time, this year's pressure and secondary education were also more rational. We believe that this round of pig price increases and sustainability is more worth looking forward to.
Low cost expansion, the company's production performance is excellent
According to the company's announcement, the comprehensive cost of raising pigs in Wen's 24Q1, April and May was 15.2 yuan/kg, 14.4 yuan/kg, and 14.2 yuan/kg, respectively. The company's cost control was ideal. The results of epidemic prevention and control were remarkable. Combined with falling feed prices, the company's costs fell at a low level. The company expects the average comprehensive cost of raising pigs throughout the year to be 14.2 to 14.8 yuan/kg. Wen's yellow chickens are leading the way in breeding. The total cost of putting out chicken in May was about 12 yuan/kg, down 0.2 yuan/kg from April.
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.