The company released its 2024 semi-annual report. In the first half of 2024, the company achieved operating income of 52.296 billion yuan, -0.84% year-on-year, and realized net profit to mother of 2.125 billion yuan, an increase of 93.15% over the previous year.

The performance was basically in line with expectations. Feed sales in the main business bucked the trend, and the market share further increased; in the first half of 2024, the company achieved feed sales of 11.79 million tons, up about 8.5% year on year, with export sales of 10.81 million tons, up 8% year on year, and market share further increased. Among them, aquatic feed increased about 10% year on year, poultry feed export sales increased about 14% year on year, and pig feed fell 7% year on year. The profitability of the company's aquatic feed has greatly improved, mainly due to the rapid adjustment of sales strategies, investment of key market resources, and strong support for high-quality customers and farmers in the second half of 2024. In the first half of 2024, general water supply increased 15%-20% year over year, shrimp and crab feed +8% year over year, and South American white prawn feed was about +20% year over year. Crayfish feed declined due to excessive farming density compounded by abnormal weather effects. At the same time, the company continued to gain strength in overseas markets. Over 1 million tons, With a year-on-year increase of more than 30%, the company will open up room for growth in overseas markets, relying on professional capabilities in various areas such as “feed, seedlings, animal insurance, and service systems”.

Seedling and farming continued to grow, and profits in the pig business exceeded expectations; in the first half of 2024, the company's seedling business was about 0.7 billion yuan, with an overall operating income of 0.466 billion yuan, a year-on-year decrease of 23%; the company will continue to invest in the seedling business, and has already invested in the seeding business to build aquaculture nurseries in Southeast Asia, beginning an international strategic layout, and continue to introduce new varieties as well as traditional varieties, taking the lead in large-scale single-sex seedlings in raw fish and yellow mackerel. In the pig breeding business, the company released about 2.7 million in the first half of 2024. The company's breeding costs continued to decline, continued to focus on the construction of its own pig breeding system, and combined feed-side R&D and scale advantages, and achieved a year-on-year loss to profit in the first half of 2024.

Investment advice: Due to low feed sales expectations, we lowered the company's 2024/2025/2026 performance. We expect the company to achieve net profit of 4.303/5.229/5.952 billion yuan in 2024-2026 (original values were 46.49/59.77/67.29 billion yuan, respectively), 57%/21.5%/13.8% year-on-year, corresponding to 17xPE in 2024, maintaining the “buy” rating.

Risk warning: risk of falling feed demand, risk of fluctuating pig prices, risk of swine disease.