Incident: The company issued an announcement that it intends to use its own funds or self-raised funds to repurchase the company's shares through centralized bidding transactions.

Comment:

It is proposed to repurchase 3 billion-4 billion yuan of shares to be used in employee stock ownership plans or equity incentives. The company announced that it intends to use its own funds or self-raised funds to repurchase the company's shares with a total amount of 3 billion yuan to 4 billion yuan, and the repurchase price will not exceed 58.6 yuan/share (including the number of shares); all of the repurchased shares will be used for employee stock ownership plans or equity incentive plans. Based on the maximum repurchase amount of 4 billion yuan and the maximum repurchase price of 58.60 yuan/share, the estimated number of shares that can be repurchased is about 68.2594 million shares, accounting for 1.25% of the company's current total share capital; based on the minimum repurchase amount of 3 billion yuan and the maximum repurchase price of 58.60 yuan/share, the estimated number of repurchasable shares is approximately 51.1945 million shares, accounting for 0.94% of the company's current total share capital. The implementation period for this share repurchase is within 12 months from the date the board of directors of the company reviewed and approved the repurchase plan. The buyback program shows the company's confidence in its continued stable development in the future and recognition of the company's value. All share buybacks will be used for employee stock ownership plans or equity incentive plans, which will help further improve the corporate governance structure and establish a long-term incentive and restraint mechanism; help the company achieve its long-term business goals and enhance the overall value of the company.

The company's opening has grown steadily, the average sales price has rebounded, and farming costs have continued to decline. The company released 6.241 million pigs in August 2024, a year-on-year increase of 10%; in January-August, it sold a total of 44.786 million heads, up 7.6% year on year; achieved sales revenue of 14.024 billion yuan in August, up 29.8% year on year; and achieved cumulative sales revenue of 83.451 billion yuan in January-August, an increase of 17.8% year on year. In August 2024, the average sales price of the company's commercial pigs was 19.71 yuan/kg, up 7.70% from July 2024. The company's total cost of pig breeding continues to decline. In August, it dropped from 15.5 yuan/kg in Q1 to 13.7 yuan/kg, mainly due to reduced feed costs and improved breeding efficiency; it is expected that by the end of 2024, the full cost of pig breeding will drop to 13 yuan/kg.

Maintain a “buy” rating for the company. The company's 2024-2025 EPS is estimated to be 3.16 yuan and 4.43 yuan, respectively, and the corresponding PE is 13 times and 9 times, respectively. The company is a leader in the integration of pig breeding in China. It continues to extend the industrial chain, has remarkable competitive advantages, and continues to refine its internal skills. Looking ahead to Q4 and next year's Q1, China's pig breeding profits are expected to remain at a good level, and there is still plenty of room for improvement in the medium to long term scale and concentration of the pig breeding industry. Maintain a “buy” rating for the company.

Risk warning: Risk of implementation of the repurchase plan falling short of expectations, risk of fluctuations in raw material prices, risk of pig price fluctuations, risk of epidemic diseases, food safety risks, natural disasters, etc.