Event: The company released its 2024 interim report. 24H1's revenue was 46.758 billion yuan, +13.49% year over year; net profit to mother was 1.327 billion yuan, which turned a loss into a profit (same period in 23 years - 4.689 billion yuan); net profit after deduction was 1.358 billion yuan, turning a loss into a profit (5.128 billion yuan for the same period of 23 years). Among them, 24Q2's revenue was 24.91 billion yuan, +17.36% year over year; net profit due to mother was 2.563 billion yuan, turning a loss into a profit (same period in 23 years - 1.94 billion yuan); net profit after deducting non-return to mother was 2.41 billion yuan, turning a loss into a profit (2.344 billion yuan for the same period of 23 years).

The 24Q2 Company's performance turned a loss into a profit, and gross margin improved significantly. Benefiting from the continuous improvement in pig prices and the gradual optimization of breeding costs, the 24Q2 company's performance improved significantly. 24H1's comprehensive gross profit margin was 10.84%, +15.24pct year on year; the cost ratio for the period was 7.58%, -0.8 pct year on year. 24Q2's comprehensive gross profit margin was 17.48%, +19.36pct year on year; the cost ratio for the period was 7.13%, -2.39pct year on year.

24H1 pig sales were +22% year-on-year, and breeding costs are continuously being optimized. 24H1 sold 14.3742 million heads of pork (including hairy pigs and fresh products), +21.96% over the same period, accounting for 3.95% of the number of pigs released in the country during the same period, the second largest market share. The average sales price of the company's hairy pigs was 15.32 yuan/kg, +5.09% year-on-year. Benefiting from the sharp rise in the volume and price of the pig business, the company achieved pork sales revenue of 26.95 billion yuan, +29.41% year over year; gross profit margin of 10.38%, +19.49pct year on year. 24Q2 sold 7.2004 million pork heads, +16.32% year over year; average sales price was 16.37 yuan/kg, +14.32% year over year; average sales weight was 123.56 kg, +0.95% year over year. By the end of 24Q2, the company's fixed assets were 33.322 billion yuan, -1.93%; projects under construction were 4.207 billion yuan, +13.72% year-on-year; and productive biological assets were 4.836 billion yuan, -11.87% YoY. Based on indicators such as the effect value of breeding sows and MSY, we believe that the price of 24H2 pigs is superior to H1 with high certainty. Combined with continuous optimization of the company's costs, the profit contribution of subsequent companies to the pig breeding business can be expected.

24H1's yellow feather chicken sales declined slightly, and cost improvements helped increase profitability. 24H1 sold 0.548 billion broilers (including hairy chicken, fresh products and cooked food), -1.04% over the same period, accounting for 7.21% of the country's poultry market during the same period, ranking first in the market share. The company's average sales price of chicken was 13.29 yuan/kg, +1.51% year over year; achieved sales revenue of 15.673 billion yuan, -0.53% year over year; gross margin was 11.07%, +12.36 pct year on year.

24Q2 sold 0.28 billion chicken, -2.3% year over year; average sales price was 13.57 yuan/kg, +1.57% year over year; average sales weight was 2.11 kg, +0.48% year over year; average profit was only about 3.23 yuan, turning a loss into a profit. Production in the company's chicken farming business continues to be stable, and the core production performance indicators remain high; at the same time, compounding the impact of falling feed raw materials prices, the company's breeding costs continue to improve, and profitability has increased significantly.

Investment advice: The company has pig and broiler breeding as its core business. Pig prices are on the rise. Combined with continuous optimization at the cost level, the profit flexibility of the company's pig business may exceed expectations; at the same time, considering factors such as low supply side of yellow chicken and seasonal improvements on the H2 consumer side, the company's overall profitability may be expected. Therefore, we raised the company's profit forecast. It is estimated that the company's EPS for 2024-2025 will be 1.42 yuan and 2.11 yuan respectively, corresponding to PE of 12 times and 8 times, maintaining the “recommended” rating.

Risk warning: risk of fluctuations in pig prices; risk of fluctuations in raw material supply and price; risk of animal diseases; risk of natural disasters, etc.