Event: The company's 2024H1 revenue +13.49%, turning a loss into a profit. The company achieved operating income of 46.758 billion yuan (+13.49% YoY) and net profit of 1.327 billion yuan in the first half of 2024; revenue of 24.91 billion yuan (+17.36% YoY) in the second quarter of a single quarter, and net profit of 2.563 billion yuan.

The volume and price of the pork business rose sharply in Q2, turning a loss into a profit. The number of pigs released by the company maintained a relatively rapid growth. Pig prices entered an upward trend due to reduced production capacity, and the company's pork business turned a loss into a profit in Q2. 2024H1's average pork sales price was 15.32 yuan/kg, +5.09% year over year; sales of pork pigs were 14.3742 million heads, +21.96% year over year; pork revenue was 26.845 billion yuan, +29.41% year over year. The company continues to pay attention to the prevention and control of major diseases and the refined management of production. The per capita efficiency of pig breeding farms increased 7.3% year over year; at the same time, the price of superimposed feed ingredients fell, and the company's breeding costs declined rapidly. We estimate that the total cost of pig breeding in 2024Q2 was about 14.3 yuan/kg. The production capacity of the company's pork pig business is relatively stable. As of 2024H1, the productive biological assets of breeding pigs were 4.14 billion yuan, compared to -1.60% at the beginning of the year. The company's financial security has increased. As of 2024H1, the balance ratio was 58.95%, compared to -2.46 pcts at the beginning of the year; 2024H1, the net cash flow from the company's operating activities was 5.809 billion yuan.

The yellow feather broiler business has stable advantages and steady development. Due to the relatively sufficient reduction in production capacity of yellow feather chicken, the overall price of yellow feather chicken showed a slow upward trend. 2024H1's average sales price of chicken was 13.29 yuan/kg, 1.51% year over year; sales of broilers were 0.548 billion yuan, -1.04% year over year; and broiler sales revenue was 15.673 billion yuan, -0.53% year over year. The company's yellow feather broiler business has a significant competitive advantage. The core production indicators have remained stable at a high level, and the per capita efficiency of chicken breeding farms increased by 5.4% year on year; compounded by the impact of falling feed raw material prices, breeding costs declined rapidly. The production capacity of the company's broiler business increased steadily. As of 2024H1, the productive biological assets of breeding chickens were 0.628 billion yuan, +2.80% compared to the beginning of the year.

Investment advice: The company is a leading pig and yellow feather chicken breeding enterprise. The scale development goals are clear, production efficiency is steadily improving, and it is expected to fully benefit from the livestock and poultry cycle. We expect the company to achieve net profit of 11.343/9.633/10.242 billion yuan in 2024-2026 in 2024-2026, and the closing price on August 26 corresponding to 2024-2026 PE will be 10.3/12.1/11.4 times, respectively, maintaining the “gain” rating.

Risk warning: Risk of pigs falling short of expectations; risk of livestock and poultry diseases; risk of large fluctuations in agricultural product prices.