The company discloses its 2024 semi-annual report. The company achieved operating income of 2494.41 million yuan in the first half of 2024, up 46.04% year on year, and net profit of 123.95 million yuan, up 146.98% year on year, turning a loss into profit. EPS was 0.24 yuan. The weighted average ROE was 2.91%, up 8.73 percentage points year on year.

Among them, in Q2 2024, the company achieved operating income of 1412.04 million yuan, a year-on-year increase of 73.88%, and attributed net profit of 127.51 million yuan, turning losses into profits year-on-year and month-on-month. As of the end of the second quarter of 2024, the company's balance ratio was 30.78%, a low level in the industry, and financially sound.

At the same time as the production volume is growing at a high rate, farming costs have maintained a steady decline. The company sold 1.0924 million pigs in the first half of 2024 (external sales+sales to the group's internal slaughter companies), up 62.83% year on year, of which 0.9201 million heads were sold abroad and 0.1723 million heads were sold to slaughter companies within the group; the average sales price of commercial pigs was 14.70 yuan/kg, up 5.60% year on year. The company's farming costs continued to decline steadily, with an average full cost of 14.2 yuan/kg in the first half of 2024. In July 2024, the total cost of the company's pig breeding was further reduced to 13.7 yuan/kg, and PSY was about 28 heads. By the end of July, the company had managed to breed about 0.104 million sows. In addition, the company exported 0.0367 million tons of feed in the first half of 2024, a year-on-year decrease of 37.48%; slaughtered pigs (number of surrogates+number of self-employed slaughters) was 0.8616 million heads, an increase of 2.28% over the previous year.

Looking ahead to the second half of the year, with the high level of domestic pig prices and the decline in upstream raw material costs, the company's fundamentals are expected to rise significantly from month to month.

Investment advice

After the reduction of production capacity in the early stages, pig prices have been operating at a high level in the profit zone since the second half of the year. We expect the company's net profit to be 0.521/1.225/1.17 billion yuan in 2024-2026, corresponding EPS of 0.99/2.33/2.23 yuan. Currently, the stock price is 28 times/12 times PE corresponding to 2024/2025, maintaining a “holder-B” rating.

Risk warning: risk of livestock and poultry epidemic, risk of natural disasters, risk of price increase of raw materials, risk of poor transportation.