Benefiting from the recovery in the farming market, the net profit from 2024H1 increased significantly over the same period last year. The company's 2024H1 revenue was -0.84% to 52.296 billion yuan, and the net profit to mother was +93.15% to 2.125 billion yuan. The company achieved good growth in feed sales and profitability. At the same time, pig farming turned losses into profits. Overall performance was accompanied by a marked recovery in the farming cycle. Among them, the company's 2024H1 revenue in the feed sector was -3.19%, gross margin reached 9.76%, up 0.92pct year on year. The company's 2024H1 feed sales volume reached 10.81 million tons, +8% year-on-year, and the country's total industrial feed output was -4.1% year-on-year, and the company's market share further bucked the trend. The agricultural products sales sector's 2024H1 revenue was +11.96% year-on-year, and gross margin reached 16.89%, +9.90pct year over year. 2024H1 listed about 2.7 million pigs, and net pig profit reversed year-on-year losses. Furthermore, raw fish prices picked up in the first half of the year, and the raw fish farming business reduced losses.

2024Q2 performed well, and the farming business achieved good profits. 2024Q2's revenue reached 29.124 billion yuan, -0.87% YoY, +25.69%; net profit to mother reached 1.264 billion yuan, +82.64% YoY and +46.9% month-on-month; the company's profit level increased markedly, with 2024Q2 gross margin reaching 11.46%, or +2.23pct YoY. The company's feed export sales increased 7% year-on-year in 2024Q2, benefiting from the recovery in the farming industry; the release of 2024Q2 pigs is expected to reach 1.4 million, and the company adheres to an asset-light, low-risk pig breeding model to achieve good profits. Currently, production capacity in the pig industry has been reduced enough. I am optimistic that the pig industry will usher in a good recovery in 2024-2025. At the same time, aquaculture is also showing a trend of recovery after experiencing a long loss cycle. It is expected that related sectors in the company's breeding chain will benefit simultaneously.

Expenses during the 2024H1 period were +0.5pct compared to the same period, and management and operation are expected to be optimized. 2024H1's sales/management/finance expense ratio was 2.16%/2.46%/0.58%, respectively, +0.25pct/+0.39pct and -0.17pct, respectively. The company's sales expenses and management expenses have increased slightly, mainly due to the expansion of the business scale, the increase in personnel, the increase in salary levels and the increase in business promotion expenses; the slight decrease in financial expenses is mainly due to the reduction in the size of current loans and the corresponding reduction in interest expenses. The company attaches importance to improving organizational management efficiency, giving full play to the advantages of middle and platform management. By establishing a four-in-one management model of “procurement+R&D+sales+production”, the company ensures rapid internal linkage, increases market influence, and implements a three-level R&D system to ensure forward-looking, sustainable export and rapid transformation of technological achievements, which can promote the strengthening of management and R&D efficiency to the greatest extent possible, and the management level is expected to continue to improve in the future.

Risk warning: The risk of abnormal weather and epidemics affecting phased fluctuations in the feed industry.

Investment advice: Stay “superior to the market”. The company's management has significant advantages. On the basis of focusing on stabilizing the main business, it focuses on the agricultural industry's ten-trillion dollar market from the field to the table, experiments and lays out new businesses in an orderly manner, and is expected to become a benchmark enterprise in the agricultural and animal husbandry industry. We maintain our profit forecast. We expect net profit to be 3.78/4.384/5.03 billion yuan for 24-26, respectively, corresponding to 22/19/17 times PE, respectively.