Haida Group released three quarterly reports: operating income of 84.816 billion yuan (yoy -2.38%) and net profit of 3.624 billion yuan (yoy +61%) in the first three quarters of 2024; of these, 24Q3 achieved operating income of 32.565 billion yuan (yoy -4.75%) and net profit of 1.499 billion yuan (yoy +30%). The 24Q3 company's revenue declined at an accelerated rate or is still affected by price cuts on raw materials such as soybean meal, fish meal, and corn; Wind statistics show that the sales price of domestic livestock and poultry feed and aquatic products in 24Q3 was about 10% and 7%, respectively, which is much higher than the company's revenue decline. We expect the company's feed sales to maintain a contrarian increase of 5% to 10% (statistics from the Feed Industry Association show a 4.7% year-on-year decline in 24Q3). The pig breeding business may be the core driving force for the company's 24Q3 profit growth. We expect its contribution to a single quarter profit of 4 to 0.5 billion yuan. The company's capital expenditure in a single quarter was further reduced to 0.65 billion yuan, and the balance ratio decreased by 0.64 pct to 55.6%. Maintain a buy rating.

Farming is reversed or transmitted upward, and the feed boom can be expected to recover

Domestic pig prices and the prices of aquatic products such as grass carp reversed one after another in 2024 due to early degeneration of breeding sows in the early stages of breeding and the continued decline in aquaculture production. Referring to historical experience, we expect the domestic pig feed and aquatic food industry to recover significantly from 2025 to 2026. If food and beverage consumption recovers clearly in the future, the price elasticity of aquatic products and the prosperity of the aquatic ingredients industry may benefit accordingly. Among them, with its comprehensive advantages in R&D, procurement, service and production, and the new equity incentive plan mobilizes employee enthusiasm, Haida Group is expected to continue to achieve excessive growth. We anticipate that the company's medium- to long-term target of 40 million tonnes of feed sales is still within reach.

With a high pig price+futures hedging model, breeding profits may cross the cycle. Starting in 2023H2, the company began using futures hedging to lock in profits for fat pigs listed in advance, which led to a marked reduction in the loss period and reduced volatility in its pig breeding business. Considering that the recovery of breeding sows is slow or will support pig prices to remain high for the next 3 to 4 quarters, and that the combined futures hedging model will smooth the risk of falling pig prices, we expect that the company's breeding profits may better cope with the downward pressure of the pig cycle and achieve more steady profits.

The pig farming business is driving high profit growth, and attention is being paid to the restoration of the feed economy

The main feed industry bucked the trend and increased its sales share, the pig farming business unleashed profit flexibility, and the company's profit continued to increase in 24Q3. Considering that pig futures prices have continued to decline since August or reduce the company's pig hedging profits, we lowered the company's 2025/26 net profit forecast to 5.508/5.762 billion yuan (previous value was 6.002/6.683 billion yuan), and maintained the 2024 net profit forecast at 3.996 billion yuan. Referring to the comparable company Wind in 2025, the average PE is expected to be 13 times, and considering the company's leading position in the industry and the sustainability of profits, the company was given an 18 times PE valuation in 2025, with a target price of 60 yuan, maintaining a “buy” rating.

Risk warning: raw material price performance/downstream farming sentiment falls short of expectations, increased competition in the feed industry, etc.