As learned from the Intelligence Finance App, in the first half of this year, with the rebound of the pig cycle, pig prices have also started to rise, reaching their highest level in the past three years in June. According to the performance forecasts disclosed recently by various pig breeding enterprises, the profitability of breeding enterprises has significantly increased year-on-year. Among them, Muyuan Foods (002714.SZ) is expected to turn around losses and achieve a net income attributable to the parent company of 0.7 billion to 0.9 billion yuan in the first half of the year, an increase of 125.19% to 132.38% compared to the same period last year. Guotai Junan Securities pointed out that in the second half of 24H2, as the impact of producer behavior is digested, and the production capacity gap is fulfilled, the cyclical upward trend will become more clear, with considerable height and duration of prosperity expected in the future. Related targets: COFCO Joycome (01610), WH Group (00288), Yurun Food (01068).

According to ZC News monitoring data, as of June 27th, the national average price of lean type live pigs this year was 15.38 yuan/kg, up 5.18% year-on-year; the highest price was 18.98 yuan/kg on June 11th, up 8.43% from the highest point last year. At the same time, the demand for piglets at the breeding end was relatively strong, but the supply was relatively limited, which supported the strong rise in piglet prices.

Behind the continuous rise in pig prices, the profitability of the breeding end has improved significantly month by month. Previously, many pig companies stated that they have been profitable since April. From the semi-annual performance forecasts recently released by many listed pig companies, the pig breeding sector in the second quarter has become mainstream with profit. Specifically, Leshan Giantstar Farming & Husbandry Corporation, New Hope, ST Tianbang and Shen Nong Group all achieved profits in the second quarter. Among them, New Hope is expected to achieve a profit of 0.75 billion yuan in the Q2 single quarter. New Hope stated, 'In the second quarter, the pig market warmed up, and pig prices rose compared with the same period last year. Combined with the improvement of the company's production management, the breeding cost steadily decreased, and the expected profit for the single quarter in Q2 will be about 0.75 billion, reducing the losses by more than 50% year-on-year for the first half of the year.'

Specifically, Muyuan Foods is expected to turn around losses and achieve a net profit attributable to the parent company of 0.7 billion to 0.9 billion yuan in the first half of 2024, an increase of 125.19% to 132.38% over the same period last year; the non-GAAP net profit is expected to be 0.9 billion to 1.1 billion yuan, an increase of 132.19% to 139.35% over the same period last year; the basic earnings per share is 0.13 to 0.17 yuan.

Although Beijing Dabeinong Technology Group (002385.SZ) is expected to lose 0.15 billion to 0.18 billion yuan in the first half of the year, it will reduce its losses by 76.75% to 80.62% year-on-year compared to the same period last year. The company's net profit in the first half of the year decreased significantly compared to the same period last year, but it achieved a profit in the second quarter, mainly due to normal operation of the feed and seed business and reduced losses in the hog business. The hog market rebounded in the second quarter, the company's hog production indicators continued to improve, and the prices of bulk raw materials such as corn and soybean meal fell, reducing the company's pig breeding costs.

According to Leshan Giantstar Farming & Husbandry Corporation's (603477.SH) performance forecast for the first half of 2024, the net profit is expected to be a loss of 32 million to 49 million yuan. However, the company stated that the negative net profit mainly came from losses in the leather business, and the pig breeding business continued to reduce costs and increase efficiency during the reporting period. At the same time, the sales prices of live pigs gradually increased, achieving a turnaround from losses to profits.

In addition, Shennong Group (605296.SH) is expected to achieve a net profit of 0.104 billion to 0.128 billion yuan in the first half of the year, an increase of 0.368 billion to 0.392 billion yuan year-on-year, a year-on-year increase of 139.42% to 148.52%. New Hope Liuhe is expected to achieve a profit of 0.75 billion yuan in the second quarter.

Under the cyclical shock upward trend, the market generally has a positive outlook on pig prices in the second half of the year. Liu Boyang, a pig analyst at ZC News, said that the continuous reduction of production capacity in the breeding end in 2023 has laid the foundation for a reduction in pig supply in 2024. At the same time, pig diseases in the fourth quarter of 2023 led to a more obvious reduction in production capacity, and the price high point in 2024 may appear in October to November. However, he pointed out that the impact of secondary feeding and breeding weight gain on current pig prices cannot be ignored, and the bullish expectation of the breeding end for the fourth quarter may drive the second round of secondary feeding to enter the market actively in July and August, helping to bring forward the high point of prices and restricting the height of pig prices in the fourth quarter. Therefore, the pig price in the first half of the second half of the year is expected to continue to rise, the high point may appear in August, and the later period may continue to maintain a high level.

Guotai Junan Securities pointed out that the right side has been deployed, and investment opportunities for cycle reversal should be valued. Upstream production capacity continues to shrink, coupled with the emotional catalyst of breeding end stocking, pig prices have recently started to rise at a high inclination rate. As we enter 24H2, with the digestion of producer behavior and the fulfillment of production capacity gap, the cyclical upward trend will become clearer, and the future cycle will have considerable height and duration of prosperity. In the later cycle sector, the reversal of pig prices will boost demand for feed and animal health products, and the valuation repair sector will start to rise.

Shanxi Securities believes that the industry's ability and willingness to replenish sows has been greatly weakened in 2024, and 'reducing costs and increasing efficiency' has become a more frequent term in the industry in the past six months. The pig breeding cycle has already reached the end of the bottom and the beginning of dawn, and the investment opportunity of pig breeding stocks is currently promising.

Guotai Junan Securities pointed out that the right side has been deployed, and investment opportunities for cycle reversal should be valued. Upstream production capacity continues to shrink, and coupled with the breeding end stocking pressure, pig prices have recently started to rise at a high inclination rate. As we enter 24H2, with the digestion of producer behavior and the fulfillment of production capacity gap, the cyclical upward trend will become clearer, and the future cycle will have considerable height and duration of prosperity. In the later cycle sector, the reversal of pig prices will boost demand for feed and animal health products, and the valuation repair sector will start to rise.

Dongguan Securities also believes that the continuous rise in hog prices and the decrease in breeding costs compared to last year will help to lift hog farming profits. Currently, the hog farming sector's valuation is still at historically low levels, and there are low-level layout opportunities for hog farming leaders who have strong cost control capabilities and ample cash reserves. In terms of broiler farming, the rising hog prices are expected to drive up demand for broilers. Keep an eye on opportunities for marginal improvements in the business climate and leading suppliers of high-quality white and yellow broilers. In terms of fodder and animal protection, pay attention to opportunities for improving demand due to the better breeding profits.

Related concept stocks:

Cofco Joycome (01610): Cofco Joycome is betting on a rebound in pig prices and expanding production against the trend. On April 18th, Cofco Joycome's 662,400 environmentally friendly and healthy live pig breeding project in Taonan City, Jilin Province officially started. The total investment of the project is about 10 billion yuan, and it is planned to be built in stages with an annual output of 3 million environmentally friendly ecological live pig breeding industry chain project. The first phase of the project has a total investment of 2.014 billion yuan and will build an annual output of 662,400 live pig breeding base and supporting facilities.

WH Group (00288): Overseas business accounts for a high proportion of WH Group's operations. CICC pointed out that the first quarter profit of WH Group's 2024 fiscal year outperformed market expectations, mainly due to a significant reduction in losses in the US pork business. During the period, revenue fell 8.3% year-on-year, while operating profit and core net profit attributable to equity shareholders increased 37.3% and 73% year-on-year, respectively. Operating profit in the Chinese market fell 10.4% year-on-year, while operating profit in the US and Europe markets increased 208.1% and 156.5% year-on-year, respectively.

Yurun Food (01068): One of the largest meat processing companies in China, offering fresh and frozen meat, as well as low-temperature and high-temperature meat products mainly made from pork. In 2024, the group will continue to increase sales of their core products, and carry a specialist position in low-temperature meat filling products, strengthen the dominant sales position of "Yurun Red Sausage" in different regional markets, dig deeper into the traditional values of "Yurun", and enhance the R&D and improvement of traditional specialty products.