According to the Wisdom Financial APP, in recent times, the rise in pig prices has become a focus of market attention. Starting from May this year, pig prices have entered an upward channel. According to DataYes! quoted by Tonglian Data, on July 17th, the price of live pigs reported 19.31 yuan/kg, an increase of 0.18 yuan/kg compared to the previous day's (July 16th) 19.13 yuan/kg, and a new high this year. Since July, the rise in live pig prices has reached 9.03%.

With the continuous rise in live pig prices, a large number of pig breeding companies have ushered in a spring. According to the recent performance forecast disclosed by the breeding pig companies, the profitability of the breeding companies has been significantly increased year-on-year. Among them, Wens Foodstuff Group, Muyuan Foods, Shennong Group, Luoniushan, and ST Tianbang are expected to achieve a performance reversal. Zhengbang Technology, Giantstar Farming & Husbandry Corporation, New Hope, Hunan New Wellful, and Dongrui Co. are expected to reduce their losses.

Specifically, Muyuan Foods is expected to reverse losses in the first half of 2024. Muyuan Foods is expected to achieve a net profit attributable to the parent company of 0.7 billion to 0.9 billion yuan in the first half of the year, a year-on-year increase of 125.19% to 132.38%; a non-deducted net profit of 0.9 billion to 1.1 billion yuan, a year-on-year increase of 132.19% to 139.35%; and a basic earnings per share of 0.13 to 0.17 yuan.

According to the performance forecast disclosed by Wens Foodstuff Group, the company is expected to achieve a net profit attributable to shareholders of the listed company of 1.25 billion to 1.5 billion yuan in the first half of the year, compared with a loss of 4.689 billion yuan in the same period last year; and a non-deducted net profit of 1.3 billion yuan to 1.55 billion yuan in the first half of the year, compared with a loss of 5.128 billion yuan in the same period last year.

Although Dabeinong Technology Group is expected to lose 0.15 billion to 0.18 billion yuan in the first half of the year, it has reduced its losses by 76.75% to 80.62% compared with the same period last year. The company’s net profit in the first half of the year has decreased significantly compared with the same period last year. In the second quarter, the market for live pigs rebounded, the company's live pig production indicators continued to improve, and prices for bulk raw materials such as corn and soybean meal fell, reducing the company's pig raising costs.

Giantstar Farming & Husbandry Corporation is expected to have a net loss of 32 million to 49 million yuan in the first half of 2024. However, the company stated that the negative net profit mainly comes from the loss of leather business. The breeding pig business has continued to reduce costs and increase efficiency during the reporting period, while live pig sales prices have gradually increased and achieved a shift from losses to profits.

In addition, Shennong Group 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 compared with the same period last year, a year-on-year increase of 139.42% to 148.52%. New Hope is expected to achieve a profit of 0.75 billion yuan in Q2.

According to the sales report released by pig companies, the recovery of pork prices has brought sustained recovery of corporate profitability. The latest data from the Ministry of Agriculture and Rural Affairs shows that in May 2024, the net profit per head of pigs raised on a large scale was 174 yuan, up 29.6% month-on-month.

Wang Zuli, chief expert in the monitoring and early warning of the pig industry at the Ministry of Agriculture and Rural Affairs, said that overall supply and demand situation, the market oversupply has gradually improved. On the supply side, the effect of production capacity reduction has gradually become apparent. On the demand side, according to the seasonal consumption law, the consumption of pork from May to June is usually 5% -10% higher than that from March to April, supporting the rise in pork prices.

The South China Fund's equity research department told the Economic Observer Network that the current is a prosperous time for pig prices, and the profitability of listed companies in the second quarter is related not only to the upward trend of pig prices, but also to the significant decrease in breeding costs of bulk agricultural products. It is judged that the prosperous period can be sustained until the end of the year.

GF Securities believes that the pig breeding industry has now returned to a better level of profitability. With the continued improvement in supply and demand in the third quarter and the decline in breeding costs, the industry is expected to benefit from the expansion of the 'scissors difference' between rising pig prices and falling costs, and the profit level of breeding companies may exceed expectations.

Tianfeng Securities recently released a special research report pointing out that this year's pig price reversal trend is clear, and with the sustained expansion of the supply-demand gap, there is considerable room for pig price increase; In addition, the industry's cautious attitude towards expanding its inventory may be conducive to extending the prosperity of this round of pig cycle. In the investment phase, the sector has entered the right side, and the rise in pig prices may become the main catalyst logic. In addition, the valuation is currently at a relatively low level, and the value of the hog farming sector is highlighted.

Zheshang Securities research reports show that the fundamentals have become increasingly clear, and pig prices are expected to continue the "staircase-shaped" upward trend in 2024. It is recommended to seize the opportunity to layout the hog farming sector.

Related concept stocks:

Cofco Joycome (01610): Cofco Joycome announced that in June 2024, the number of live pigs slaughtered was 0.263 million, a decrease of 0.76% compared to the previous month. The average selling price of live pigs was 18.51 yuan/kilogram, an increase of 15.69% compared to the previous month. The sales volume of fresh pork was 0.0208 million tons, and the proportion of brand revenue in the fresh pork business was 26.54%.

WH Group (00288): In mid-July, Credit Suisse released a research report stating that it gave WH Group a "buy" rating, lowered the company's sales forecast for 2024 to 2026 by 6%, 7%, and 7% respectively, raised its profit forecast for 2024 by 4%, but lowered its profit forecast for 2025 and 2026 by 3% and 1%, respectively, and set a target price of HKD 6.21. Earlier, WH Group proposed to spin off its Smithfield Food business operated in the United States and Mexico. The bank believes that investors have digested the relevant news and also like its spin-off plan, but believes that WH Group will need its own value-added strategy, such as share buybacks, to attract investors. It is predicted that the company's operating profit for the second quarter of this year will be USD 0.483 billion, a year-on-year increase of 76%, but sales revenue will fall to USD 6 billion.

Dekang Agriculture and Animal Husbandry (02419): In mid-June, CICC released a research report stating that it maintained its "outperform the industry" rating on Dekang Agriculture and Animal Husbandry. Based on the recent rise in pig prices and the company's cost improvement, it raised its net income forecast for 2024 by CNY 1.2 billion to CNY 2.6 billion and maintained its net income forecast for 2025 at CNY 3.8 billion. Combining the adjustment of profit forecasts and the average market value per share of the company, the target price was raised by 10% to HKD 66. The company recently attended CICC's 24-year midterm strategy conference and exchanged views with participating investors on technology, breeding management, and breeding models. The bank believes that the company's management, technology, and model advantages are significant, and the cost level continues to lead the industry, and is bullish on the company's ROE growth potential.