The Company discloses its 2024 3Q Report. The company achieved operating income of 84.861 billion yuan in the first three quarters of 2024, a slight decrease of 2.38% year on year, and attributable net profit of 3.624 billion yuan, up 60.95% year on year, EPS 2.18 yuan, weighted average ROE of 17.28%, up 5.26 percentage points year on year. Among them, the company achieved revenue of 32.565 billion yuan in a single quarter, down 4.75% year on year, and attributed net profit of 1.499 billion yuan, up 30.17% year on year.

The market share of the feed business has further increased. In the first three quarters of 2024, the country's total industrial feed output was 227.87 million tons, down 4.3% year on year; the average price of mixed feed for fattening pigs, laying hens, broilers, and carp was -8.6%, -9.5%, -8.7%, and -2.8%, respectively. Since this year, the price of raw materials such as corn, soybean meal, and fishmeal in the upstream feed has declined, leading to a drop in the price of feed products. Affected by product prices, the company's revenue declined slightly year-on-year. In terms of feed sales, the company's overall feed sales growth rate remains higher than the industry growth rate, and the market share of the feed business has further increased.

The fundamentals of the pig breeding business rebounded month-on-month. Entering the 3rd quarter, domestic pig prices showed a further increase compared to the 2nd quarter. The average domestic pig price in the 3rd quarter was about 19.6 yuan/kg, which was significantly higher than 16.3 yuan/kg in the 2nd quarter. At the same time, benefiting from the decline in prices of raw materials such as upstream soybean meal, the average profit levels of domestic self-breeding and outsourced piglet breeding industries rose from 109 yuan/head and 198 yuan/head in the second quarter to 500 yuan/head and 346 yuan/head in the third quarter, respectively. The fundamentals of the company's pig breeding business rebounded further in Q3 compared to the previous quarter.

We expect the company's net profit from 2024-2026 to be 4.377/5.392/6.325 billion yuan, corresponding EPS of 2.63/3.24/3.80 yuan, and the current stock price corresponding to 2024 PE is 17 times higher, maintaining a “buy-A” rating.

Risk warning: Risk of lower than expected livestock and poultry feed sales due to the livestock and poultry epidemic, lower than expected sales of aquatic feed due to extreme weather, and price fluctuations of raw materials such as fishmeal and corn and soybean meal.