Incident: The company released its 2024 semi-annual report. 24H1 revenue was 46.758 billion yuan, up 13.49% year on year; net profit to mother was 1.327 billion yuan, up 128.31% year on year. Corresponding to 24Q2 revenue of 24.91 billion yuan, a year-on-year increase of 17.36%; net profit to mother was 2.563 billion yuan, an increase of 232.16% year-on-year.

Pig farming business: breeding costs continue to be optimized, and pig production is growing steadily. 24H1's cumulative pork sales volume was 14.3742 million heads, +21.96% year-on-year, and the cumulative sales revenue of pork pigs was 26.845 billion yuan, +29.41% year-on-year. Among them, the company's cumulative sales volume of pork in a single quarter of 24Q2 was 7.1943 million heads, +16.22% year-on-year. The average sales price of the company's H1 pork in 24 years was 15.32 yuan/kg, +5.09% compared with the same period last year.

In terms of production capacity, the company's H1 productive biological assets in 2014 were 4.836 billion yuan, -11.87% year-on-year.

As of March '24, the company was able to breed about 1.55 million sows, and there were plenty of backup sows. The production cost of pig seedlings was 370 yuan/head, and the production cost of pig seedlings was reduced to 330 yuan/head in May '24.

The average comprehensive cost of pork pig breeding in the company from January to April '24 was about 15 yuan/kg. With excellent epidemic prevention and control effects and stable production, the comprehensive cost of pork pig breeding was reduced to 14.2 yuan/kg in May '24. As the company continues to explore cost reduction space in all aspects, the comprehensive cost of pig breeding is expected to drop in 24 years.

Chicken farming business: Production and operation are stable, and falling costs are expected to expand profit margins. 24H1's cumulative broiler sales volume was 0.548 billion, -1.04% YoY; broiler sales revenue was 15.673 billion yuan, -0.53% YoY. Among them, the company's cumulative broiler sales volume in a single quarter of 24Q2 was 0.28 billion, -2.19% year-on-year.

In May '24, the company reduced the total cost to sell chicken to 6 yuan/kg, down 0.1 yuan/kg from month to month.

The chicken farming business sector is expected to further expand its profitability as feed costs fall.

Investment advice: We expect the company's net profit to be 7.21 billion yuan, 13.15 billion yuan, and 19.82 billion yuan in 2024, 2025, and 2026, respectively, up 212.9%, 82.2%, and 50.8% year-on-year, respectively. The current stock price corresponds to PE 15, 8, and 6 times, respectively. Maintain a “buy” rating.

Risk warning: risk of fluctuating pig prices, risk of sudden illness.