The company announced its semi-annual results forecast. The net loss attributable to the parent company's owners for the first half of 2024 is estimated to be 33 million yuan to 48 million yuan, and the net loss after deducting non-recurring profit and loss is 31.3 million yuan to 46.3 million yuan.

Feed, meat and poultry lost money under pressure, and the pig business turned a loss into a profit. In the first half of 2024, due to the optimization and adjustment of production capacity in the pig industry, the company's pig feed sales declined a lot, leading to a decline in feed business profits. In terms of the meat and poultry business, the breeding side of the industry generally faced losses, and broiler prices fluctuated and declined; according to Zhuochuang's statistics, the average price of white feather chicken 24H1 fell to 3.77 yuan/kg. Affected by this, the company's meat and poultry business profit changed from profit to loss year-on-year. The pig sector benefited from rising pig prices combined with falling breeding costs, and the 24H1 pig breeding business turned a year-on-year loss into a profit.

Intensive repurchases have stabilized the market, and the company has strengthened shareholders' confidence. The company announced in June that it plans to use its own funds to repurchase the company's 0.15 billion yuan - 0.3 billion yuan shares through centralized bidding transactions within 3 months. The repurchase price for each share will not exceed 10 yuan. The repurchased shares will be used for sale in accordance with relevant regulations, and the portion of the sale that has not been implemented after the due date will be cancelled in accordance with law. Hefeng Co., Ltd. hopes to demonstrate firm confidence in the company's future development potential through this move, encourage investors to invest rationally over the long term, strengthen shareholders' confidence, and lay a solid foundation for the company's long-term stable development. As of July 16, the company has repurchased 19.564 million shares, with a total payment amount of 0.129 billion, accounting for 2.13% of the company's current total share capital.

Brazil's export ban may cause chicken prices to rise, and the company's meat and poultry business is expected to benefit. Affected by the avian virus, Brazil has announced a series of export bans to prevent the further spread of the epidemic in the country. From January to May 2024, China imported 0.2133 million tons of white feather broiler from the Brazilian market, accounting for 58.85% of the country's total imports. The import volume steadily topped China's import list. If Brazilian poultry imports are suspended, short supply will strongly support the price of white feather chicken, which is expected to help the company develop its meat and poultry business.

Considering the gradual clearance of pig production capacity and the decline in feed demand, feed income was lowered for 24-25 years; considering the recovery in pig prices, the income of the pig industry was raised for 24-25 years. According to the 23-year base, the 24-25 gross profit margin was lowered. The company's net profit for 24-26 is estimated at 0.599, 0.855, and 0.868 billion (the original forecast was 1.199 and 1.085 billion for 24-25).

Considering that 2024 pigs are expected to turn a loss into a profit, we chose to value the 2025 results. By sector, the total profit of the feed, trade-related business and pig sector is estimated to be 0.59 billion yuan, and the poultry industry's profit is 0.26 billion yuan. According to the 25-year level of feed, pig breeding, and broiler companies, the above 2 major sectors were given 10x and 10xPE, respectively, with a target price of 9.30 yuan, maintaining a “buy” rating.

Risk warning: risk of raw materials, risk of epidemic diseases, falling consumer demand exceeding expectations, risk of fluctuations in livestock and poultry prices.