Incident: On August 26, the company published its 24-year report. 24H1 achieved revenue/net profit to mother of 46.758/1.327 billion yuan, +13.49%/+128.31% year-on-year, respectively. The basic EPS was 0.20 yuan. In 24Q2, we achieved revenue/net profit of 24.91/2.563 billion yuan, +17.36%/+232.16% year-on-year.

The sharp rise in the volume and price of 24H1 pigs led to a year-on-year increase in pig breeding revenue, and the broiler breeding business was stable year-on-year.

The 24H1 pig breeding sector earned 26.845 billion yuan, +29.41% year-on-year. In terms of sales volume, 24H1 pigs sold 14.3742 million heads, +21.96% year over year; in terms of sales price, 24H1 pigs sold at an average sales price of 15.32 yuan/kg, +5.09% year over year. The 24H1 broiler sector earned 15.673 billion yuan, -0.53% year-on-year. In terms of sales, 24H1 sold 0.548 billion broilers (including hairy chicken, fresh products and cooked food), -1.04% year over year; in terms of price, the average sales price of hairy chicken was 13.29 yuan/kg, +1.51% year over year. It is expected that 24H2's pig business will continue to benefit from rising pig prices while maintaining a high listing growth rate; the broiler business will maintain a steady trend. Furthermore, as of the end of 24H1, the number of farmers cooperated by the company was 0.0458 million, +2.23% over the same period last year, with a slight increase in the number of farmers.

The reduction in 24H1 farming costs further enhanced performance. Benefiting from lower feed raw material prices and improved farming efficiency, the company's farming costs improved markedly over the same period last year. In terms of human efficiency, the per capita efficiency of feed factories/chicken breeding farms/pig breeding farms increased by 4.4%/5.4%/7.3%, respectively.

Benefiting from lower costs and a recovery in sales prices, the gross margin of major products increased significantly. The gross margin of the 24H1/24Q2 company was 10.84%/17.48%, +15.24pct/+19.36pct year-on-year. The average price of pigs sold by the company rose sharply in June, which clearly boosted gross margin. The cost rate for the 24H1/24Q2 period was 7.58%/7.13%, -0.81 pct/-2.40 pct year-on-year, due to revenue growth diluting expenses. Among them, the financial expense ratio was 1.18%/1.07%, -0.49pct/-0.99pct year-on-year. The reason is that interest expenses and exchange gains and losses have improved markedly.

Investment advice: Based on the business situation in the first half of the year, we raised our profit forecast. The estimated net profit for 2024-2026 is 11.174/13.678/12.981 billion yuan, or +274.9%/+22.4%/-5.1% year-on-year, and the corresponding PE is 10.4/8.5/9.0 times. The company's leading position in the breeding industry is stable, the number of broilers is stable, and the number of pigs is growing. The competitiveness of the company's main business continues to be strengthened, growth is good, and the “buy” rating is maintained.

Risk warning: the amount of livestock and poultry released falls short of expectations, rising costs exceeding expectations, poor consumption, risk of epidemic diseases, etc.