Pig prices reversed and rebounded, helping Q2 results turn losses into profits

On July 11, 2024, Jin Xinnong announced the 2024 semi-annual results forecast.

2024H1 expects to achieve net profit of 4300 to -39 million yuan; it is expected to achieve net profit of 4100 to -37 million yuan after deduction. 2024H1 drastically reduced losses compared to 2023H1. Mainly due to the decline in the price of feed raw materials and the continuous improvement of pig breeding efficiency, breeding costs dropped sharply. At the same time, pig prices rebounded in 2024Q2, and 2024Q2 profits turned losses into profits. 2024Q2 Jin Xinnong expects to achieve net profit of 9-13 million yuan; net profit after deduction is expected to be 5-9 million yuan. It is expected that 2024H2 will continue to optimize the breeding management system, reduce pig breeding costs, and rapidly develop the feed processing business. Revenue is expected to increase dramatically, and profit margins are expected to pick up further.

Innovative marketing is deeply involved in the market, and feed export sales are expected to increase dramatically in 2023; Xinnong will achieve a revenue of 2.6 billion yuan in the feed processing business, an increase of 12.78% over the previous year; achieve feed sales of 0.6801 million tons, an increase of 16.70% over the previous year.

As one of the early pioneers of feed feeders in China, Jin Xinnong has an industry leading edge in the field of feed feed segmentation. Feed products cover all different growth stages of pigs, and the product matrix is perfect to create a trinity pig feed nutrition system. In 2024, Jin Xinnong implemented a shared and co-creation incentive mechanism, expanded and optimized sales teams, and cooperated with other companies to establish joint ventures to further cultivate regional markets with insufficient production capacity through innovative marketing methods, and feed sales are expected to increase dramatically. The company set a target for feed export sales in 2024 to increase sales by 50% to achieve 1.0202 million tons of sales.

Farming costs continue to decline, with cost reduction and efficiency as the primary goal

2024H1 Jinxinnong achieved pig sales revenue of 0.772 billion yuan, a year-on-year increase of 27.15%; achieved 0.5989 million pigs, an increase of 10.00% over the previous year, including 0.3393 million commercial pigs, 0.2372 million piglets, and 0.0224 million breeding pigs. Entering 2024, the sales cost of Jinxinnong pigs continued to decline, from 15.68 yuan/kg in 2024Q1 to 15.11 yuan/kg in April 2024. In 2024, Jinxinnong takes cost reduction and efficiency as the primary goal of pig breeding business development, focusing on breeding management. It is estimated that there is still room for reduction in breeding costs. It is estimated that in 2024, Jinxinnong's pig sales cost will be less than 15.5 yuan/kg, helping to gradually expand profit margins.

The capital structure is improving steadily, and the debt ratio is expected to gradually decline

Due to the low pig price cycle in 2023, Jinxin's agricultural performance entered a period of pressure, and the balance ratio climbed to 74.06% at the end of 2023. Along with the reversal of the pig cycle, the recovery in pig prices and the increase in feed demand, the company's profit situation gradually picked up, and the balance ratio showed a downward trend. The balance ratio at the end of 2024Q1 was 73.66%. It is expected that from 2024Q2, Jinxin Agricultural's performance will turn a loss into a profit, and the balance ratio is expected to gradually decline.

Profit forecasting

The company's revenue for 2024-2026 is 5.16, 6.14, and 7.049 billion yuan respectively, EPS is 0.21, 0.30, and 0.29 yuan, respectively. The PE corresponding to the current stock price is 18.8, 12.9, and 13.5 times, respectively. Jin Xinnong has built a complete feed product matrix and has an industry leading edge in the field of feed teaching and feed segmentation. The company is focusing on developing feed export sales, and revenue is expected to increase dramatically. At the same time, the scale of pig breeding is steadily increasing, and breeding costs have room for further reduction, helping to further expand profit margins, so it is given an “increase in weight” investment rating.

Risk warning

Risk of disease in the pig breeding industry; risk of natural disasters and extreme weather; risk of changes in industrial policy; rise in pig prices falling short of expectations; risk of fluctuations in feed and raw materials markets; risk of macroeconomic fluctuations; risk of progress of new feed marketing plans falling short of expectations.