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According to Caixin, on August 26th, listed pork companies on the A-share market are enjoying the benefits of the market cycle as pork prices rise. Wens Foodstuff Group (300498.SZ) is no exception. As the second largest pork giant in the A-share market, the company has made significant progress in cost reduction and efficiency improvement while the pork prices rebounded, turning losses into profits compared to the same period last year, with a profit of 2.563 billion yuan in Q2.

Wens Foodstuff Group announced tonight that it achieved operating revenue of 46.739 billion yuan in the first half of this year, a year-on-year increase of 13.48%. The net income attributable to shareholders of the listed company was 1.327 billion yuan, a year-on-year increase of 128.31%. This turned the losses into profits. The company recorded a net loss of 1.236 billion yuan in Q1, and based on this calculation, it achieved a net income of 2.563 billion yuan in Q2.

Caixin journalists noticed that with the rebound of the pig cycle and the decline in the breeding cost of pigs and chickens, the gross margin of the company's two main businesses has been greatly improved in the first half of the year, becoming the main reason for the turnaround from losses to profits in H1.

Looking at different industries, in terms of pigs, the company sold 14.3742 million pigs (including hogs and fresh products) during the reporting period, a year-on-year increase of 21.96%. The average selling price of hogs was 15.32 yuan/kg, a year-on-year increase of 5.09%. The sales revenue of pork amounted to 26.845 billion yuan, a year-on-year increase of 29.41%. The gross margin of pork increased by 19.49 percentage points compared to the same period last year.

As for yellow feather chickens, the company sold 0.548 billion chickens (including hens, fresh products, and cooked food) during the reporting period, a decrease of 1.04% year-on-year. The average selling price of hens was 13.29 yuan/kg, a year-on-year increase of 1.51%. The sales revenue of chickens amounted to 15.673 billion yuan, a decrease of 0.53% year-on-year. The gross margin of chickens increased by 12.36 percentage points compared to the same period last year.

In terms of breeding costs, according to previous publicly available data, the comprehensive cost of pig breeding in the company has dropped to around 7.1 yuan/jin by May, while the comprehensive cost of pig breeding in the company was as high as 8.15 yuan/jin in the fourth quarter of last year. The cost reduction in the first half of the year exceeded 1 yuan/jin. The cost of raising chickens in May dropped to around 6 yuan/jin, while the cost in the fourth quarter of last year was 6.5 yuan/jin.

It is worth noting that behind the industry's profitability, the company's reduction of its liabilities has also achieved certain results. At the end of the reporting period, the company's asset-liability ratio once again dropped to below 60%, at 58.95%, a decrease of 4.42 percentage points from the end of the first quarter.

Looking ahead to the second half of the year, industry insiders have told reporters that pig prices are expected to continue to remain high, and the profitability of pig enterprises is even more promising than in the first half of the year. Wens Foodstuff Group, with a full-year target of 33 million hogs slaughtered, may need to slaughter over 18 million hogs in the second half of the year, and the H2 performance of the company may further improve on the basis of H1.

In addition, under the boost of seasonal demand, the broiler business is also expected to provide support for the H2 performance. Wens Foodstuff Group previously stated during an investor event, 'Based on historical experience, the second half of the year is the peak season for broiler consumption, and it is expected that the business outlook for broilers in the second half of the year will be better than in the first half of the year.'

Since August, multiple institutions have already issued forecasts for the company's 2024 performance, with the highest value reaching 10.44 billion yuan, a significant increase from the beginning of the year.

It should be noted that despite the impressive performance, the company's performance in the secondary market has been somewhat lackluster. Since June, the company's stock price has dropped by 17.74%.