Key points of investment
The company released the monthly sales report for May:
(1) Pig products: In May 2024, the company sold 2.3789 million pigs, an increase of 13.63% over the previous year, with sales revenue of 4.660 billion yuan; in May, the average sales price of hairy pigs was 15.83 yuan/kg, up 4.28% from April. From January to May 2024, the company sold a total of 1.0417 million pork heads, an increase of 22.93%; in January-May, the company achieved cumulative sales revenue of 21,644 billion yuan, an increase of 25.27% over the previous year.
(2) Chicken products: In May 2024, the company sold 94.218,800 broilers, up 2.17% year on year, with sales revenue of 2,719 billion yuan; in May, the average sales price of chicken was 13.83 yuan/kg, up 4.69% from April. From January to May 2024, the company sold a total of 455.506 million broilers, a year-on-year decrease of 0.83%; in January-May, the company achieved cumulative sales revenue of 13.047 billion yuan, a year-on-year decrease of 1.19%.
Pig breeding performance continues to improve, and costs are falling steadily
The company's pork pig breeding business is gradually improving. Along with the effectiveness of epidemic prevention and control, production performance has been further improved. In May, the number of Wo Jun Jianzai raised to 11.3; the production protection rate was about 7%; PSY was about 23; the marketing rate was about 92%; and the feed-to-meat ratio was about 2.62. The company's pork pig breeding costs continued to drop, falling to around 7.1 yuan/kg in May, and the cost gap between regional units gradually narrowed. Out of the company's 16 provincial regional breeding units in May, the comprehensive cost of pig breeding reached 11 below 7.1 yuan/kg.
Production capacity is abundant, and the number of pigs released is expected to grow steadily
If the company's current pig breeding farm produces at full capacity, sows can produce 46 million commercial pig seedlings according to normal production performance. Currently, the effective breeding capacity during the fattening stage is about 35 million heads. By the end of April, the company was able to breed about 1.57 million sows, and the capacity utilization rate of the pig breeding farm was 68%. There is still room for improvement in the future. According to the announcement, the company plans to sell 30-33 million pork heads in 2024, an increase of 14.23%-25.66% over the previous year.
Broiler production remains stable, and is expected to achieve reasonable profits in the second half of the year. The production performance of the company's broiler breeding business continues to maintain a high level. In May, the company's broiler market rate exceeded 95%, and the feed-to-meat ratio dropped to 2.79. The total cost of the company selling chicken in May dropped to around 6 yuan/kg, down about 0.1 yuan/kg from month to month. The broiler market is expected to be better in the second half of '24 than in the first half of the year, and the company's broiler breeding business is expected to be reasonably profitable, considering that the broiler market in the second half of '24 fell to a historic low level and that the broiler breeding business is expected to achieve reasonable profits.
Investment advice:
Along with the reversal of the pig cycle in 2024 and the rise in yellow feather chicken prices, we are optimistic about a strong recovery in the company's profit level. According to the fluctuation trend of pig prices and chicken prices and the company's development plan, we expect to achieve net profit of 98.66/130.07/11.613 billion yuan in 2024/25/26, respectively, and EPS of 1.48/1.96/1.75 yuan respectively. The current stock price corresponds to PE 13.51/10.24/11.47 times, respectively, maintaining a “buy” rating.
Risk warning:
The number of pigs released fell short of expectations, livestock and poultry prices fell short of expectations, and the price of raw materials rose sharply.