Haida Group released its quarterly report for the year 24: the company achieved operating income of 32.56 billion yuan (-4.75%) and net profit of 1.5 billion yuan (+30.17% year over year) in 24Q3. The first three quarters achieved cumulative operating income of 84.86 billion yuan (-2.38% YoY), net profit to mother of 3.62 billion yuan (YoY +60.95%), gross margin of 11.33%, +2.62 pct YoY.

The company's feed business is developing steadily, leading advantages continue to be demonstrated, and the industry may be undergoing restoration. Affected by the decline in seedlings, the national aquatic feed industry is under great pressure. According to data from the China Feed Industry Association, aquatic feed production declined year-on-year in the first half of the year, and since the third quarter, due to the adverse effects of typhoons and other factors, the aquatic feed industry may also face some pressure. However, Haida Group's overall performance may continue to lead the industry.

We believe that, on the one hand, the fourth quarter is the peak consumption season, and there may be an increase in sales of South American white prawns, etc.; on the other hand, the price of some aquatic products will rise this year. We expect the fishery seedlings to increase next spring, and the company's special water feed sales are also expected to rise.

The pig farming business is highly profitable, while aquaculture or profits are limited. Q3 The price of pigs rose significantly year-on-year and month-on-month. The average quarterly price was around 19.4 yuan/kg. Feed costs have dropped markedly since this year. It is expected that the company's breeding costs may also drop, and the company may achieve better breeding profits in the third quarter. However, considering the company's participation in pig hedging, pig futures contracts have risen, which may have some negative effects. In terms of aquaculture, since raw fish prices and South American white prawn prices were still relatively low in the third quarter, the company's aquaculture business profits are expected to be limited. Looking forward to the future, we believe that the company's pig farming is mainly an asset-light and low-risk model. At the same time, the company participates in hedging, and is expected to achieve stable breeding profits in the future. In terms of aquaculture, the company will continue to improve aquaculture capacity, reduce aquaculture costs, moderately control the scale of aquaculture, and may gradually achieve profits in the future.

The industry boom is expected to pick up, and the company's leading advantages are expected to continue to be demonstrated. We believe, first, that the aquafeed industry is expected to reach an inflection point. The pressure on aquatic feed this year was mainly affected by the decline in seeding at the beginning of the year, and the rise in aquatic prices this year is expected to drive an increase in seedlings next spring, and the aquatic feed industry is expected to prosper next year. Second, in the context of industry pressure in recent years, leading enterprises have achieved an increase in market share with their multi-dimensional advantages such as technology, management, and capital. Small and medium-sized enterprises have continued to withdraw from the market, and the competitive pattern of the industry has been optimized. In the future, vicious competition in the industry is expected to decrease, and leading advantages are expected to be more fully exploited.

Third, the company continues to explore overseas markets. The company's overseas feed sales increased by 24% and 30% in the first half of '23 and '24, respectively, and it is expected that it will continue to contribute to the company's feed business in the future. Therefore, we recommend focusing on Haida Group.

Profit forecasting and investment advice. We expect EPS to be 2.80/3.12/3.67 yuan respectively in 24-26. Considering that the company is a relatively scarce leading company in the industry, the company will be given 20-25 times PE in 24 years, with a corresponding reasonable value range of 56.0 to 70.0 yuan, maintaining the “superior to the market” rating.

Risk warning. Consumption of aquatic products, livestock and poultry fell far short of expectations, and natural disasters exceeded expectations.