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On August 22, Zhongjing Agriculture (002385.SZ) significantly reduced losses in the first half of the year and achieved profitability in the second quarter due to the upward trend of the pig cycle.

According to industry insiders, the hog market is expected to continue to remain high in the second half of the year, and the profits of related pig companies will mainly be reflected in the second half of the year. In addition, due to seasonal factors, seed profits are generally reflected in the second half of the year. Zhongjing Agriculture's performance is expected to be supported by the dual-track strategy of seeds and hogs in H2.

After the market closed today, Zhongjing Agriculture released its 2024 interim report, with operating income for the reporting period reaching 13.095 billion yuan, a year-on-year decrease of 16.42%; net loss attributable to shareholders of listed companies amounted to 0.156 billion yuan, a 79.84% decrease compared to the same period last year; among which, the second quarter reversed losses into profits, achieving a profit of 53.56 million yuan.

From the perspective of revenue, the overall downturn in the feed industry in the first half of the year was the main factor for the decline in revenue. The company achieved feed sales revenue of 9.226 billion yuan in the reporting period, a year-on-year decrease of 20.52%. Feed sales volume was 2.5335 million tons, a year-on-year decrease of 8.92%. Among them, pig feed sales volume was 2.0029 million tons, a year-on-year decrease of 10.01%; ruminant feed sales volume was 0.2971 million tons, a year-on-year decrease of 8.62%.

In fact, in the first half of this year, due to the continuous dissolution of pig production capacity in the previous period, the overall demand in the domestic feed industry was relatively sluggish. The total industrial feed production in the country decreased by 4.1% year-on-year, with compound feed, concentrated feed, and additive premix feed production reaching 135.3 million tons, 6.05 million tons, and 3.3 million tons, respectively, with year-on-year decreases of 4.0%, 10.8%, and 0.7%.

The recovery of hog farming is the main support for Beijing Dabeinong Technology Group to reduce losses in the first half of the year and achieve profitability in the second quarter. According to the sales briefing, the selling price of the company's hogs from January to June showed an increasing trend month by month, reaching a peak of 18.11 yuan in June. The gross margin of hog farming in the reporting period increased by 19.48 percentage points compared to the same period last year.

It is worth mentioning that as the company's focus track seed industry, the revenue proportion in the first half of this year increased by 0.6 percentage points compared to the same period last year. During the reporting period, seed sales volume reached 19.98 million kilograms, an increase of 87.74% year-on-year. The sales revenue of seeds is about 0.3 billion yuan, a year-on-year increase of 13.48%. Among them, the sales revenue of rice seeds is 0.209 billion yuan, a year-on-year increase of 25.28%; the sales revenue of corn seeds is 0.013 billion yuan, a year-on-year decrease of 82.1%.

Looking ahead to the second half of the year, the price of hogs has continued to hit new highs since August. Many industry insiders interviewed by reporters believe that the second half of this year will be the main profit period for pig enterprises. The National Development and Reform Commission has also recently stated that considering the continued willingness of small-scale pig farmers to replenish their stocks and the temporary inability to close the pig supply gap, there is still a possibility of an increase in pig prices. The average profit per hog for the future piglet fattening model is 617.20 yuan.

In addition, the profit of seed sales is generally reflected in the second half of the year due to seasonal factors. The company stated in recent investor activities, 'The profit of the seed industry has not been reflected yet due to seasonal factors. It is currently in a strengthening period. It is expected that in the 2024 planting season, the promotion area of corn seed industry will increase year-on-year by 15-20%, and the overall area of corn and rice seed production will remain stable.'

It should be noted that as of the end of the reporting period, the company's short-term borrowings were 8.167 billion yuan, accounts payable were 2.151 billion yuan, non-current liabilities due within one year were 2.188 billion yuan, and the cash on hand was only 3.114 billion yuan.