Caifinance News, November 4th (Reporter: Liu Jian, Wang Ping'an)—Since the market has warmed up, A-share listed hog farming enterprises have reaped the benefits, achieving a total profit of over 23 billion yuan in the first three quarters of this year. Caifinance News reporters have learned from multiple interviews that besides the rise in hog prices, a significant decrease in costs has also been another important driver for the profitable performance of listed hog farming enterprises.

Caifinance News reporters' statistics show that among the 12 listed hog farming enterprises in A-shares with publicly available cost information, considering no differentiation in cost calculation methods, 11 hog farming enterprises have reduced costs to the range of 14 yuan per kilogram, with 5 of them reaching the range of 13 yuan per kilogram.

With significant cost reduction effects, many listed hog farming enterprises have already achieved their cost targets for the year and have indicated that there is still room for cost reduction in the fourth quarter and next year. An individual from ST Tianbang (002124.SZ) stated, "We expect that next year, the complete cost of fattening can be reduced to below 14 yuan/kilogram. After normal full-capacity production, the total cost can be reduced to below 12 yuan/kilogram."

Some hog farming enterprises have even begun to aim for the 12 yuan cost range, with ShenNong Group stating, "By 2025, the company's farming business cost control target is: complete cost less than 13 yuan/kilogram." Analysts believe that the rise in hog prices is only a short-term positive, while cost control is the moat for the long-term development of hog farming enterprises. Although hog prices have recently declined, with support from this year's cost reduction achievements of listed hog farming enterprises, the profitability of related enterprises next year may still be guaranteed.

90% of hog farming enterprises have entered the 14 yuan cost range, who will be the cost reduction leader?

Caifinance News reporters' analysis of publicly available information reveals that, without considering the impact of differentiation in statistical methods, 11 listed hog farming enterprises in A-shares have reduced their latest costs to below 15 yuan/kilogram, accounting for almost 90%. Among them, ShenNong Group (605296.SH), Muyuan Foods (002714.SZ), Wens Foodstuff Group (300498.SZ), Tecon Biology (002100.SZ), and Leshan Giantstar Farming&Husbandry Corporation (603477.SZ) have even reduced costs to below 14 yuan/kilogram.

(List of Listed Hog Farming Enterprises' Costs, Produced by Caifinance News reporters)

Among them, Shennong Group's complete cost in September was 13.4 yuan/kg, which is currently the lowest cost of listed pig enterprises, winning the title of 'Cost Reduction King'; followed by Muyuan Foods at 13.7 yuan/kg, Wens Foodstuff Group at 13.8 yuan/kg, and Tecon Biology at 13.91 yuan/kg.

In terms of cost reductions, 9 pig enterprises have already reduced their costs by more than 1 yuan/kg this year, with Jiangsu Lihua Animal Husbandry (300761.SZ) leading the decline by 3 yuan/kg; followed by Muyuan Foods, Wens Foodstuff Group, and Tecon Biology, all reducing by more than 2 yuan/kg this year.

Financial Association reporters noticed that the decrease in feed raw material costs is an important factor in the cost reduction of pig enterprises this year. Choice data monitoring shows that as of now, the average prices of soybean meal and corn are 3074 yuan/ton and 2155 yuan/ton respectively, decreasing by 1000 yuan/ton and 333 yuan/ton respectively this year. Industry analysts have stated, 'This year, the prices of feed raw materials corn and soybean meal are showing a downward trend and have reached new lows in recent years, becoming important support points for reducing pig enterprise costs.'

Improvements in production performance and a decrease in period costs have become another important factor in the cost reduction of pig enterprises. Muyuan Foods recently stated that since the beginning of this year, the company's complete cost of hog farming has continued to decrease, dropping slightly below 13.7 yuan/kg in September, compared to over 2 yuan/kg lower than the 15.8 yuan/kg at the beginning of the year. The decrease in feed prices contributes around 50%, while improvements in production performance and reduced period costs contribute around 50%.

ST Tianbang relevant personnel, in an interview with the Financial Association reporters, stated, 'The company's costs have decreased this year, benefiting partly from the decrease in feed raw material prices, and mainly from the improvement in production efficiency and cost savings.'

It is worth mentioning that in terms of the completion of cost targets this year, Wens Foodstuff Group, Shennong Group, Tecon Biology, Jiangsu Lihua Animal Husbandry, ST Tianbang, and Shenzhen Kingsino Technology (002548.SZ) and other 6 listed pig enterprises have completed their annual targets, with the remaining pig enterprises also expected to achieve their goals in the fourth quarter. Some analysts believe, 'Based on the decrease in feed prices in the first three quarters, the cost reduction achievements of related enterprises are quite significant, and it is expected there is still room in the fourth quarter, with the completion status of the pig enterprises' annual cost targets likely to be good.'

However, some analysts point out, 'Related pig enterprises still need to guard against the cost impact brought about by the rise in feed raw material prices, and can focus more on improving production performance to reduce costs.'

Several pig enterprises have stated that there is still room for cost reduction, and next year's profitability may still be guaranteed.

On the premise that cost reduction has achieved good results in the first three quarters, many listed pig companies have stated that there is still room for a decrease in breeding costs this year and next year.

Wens Foodstuff Group personnel stated, "In July, the company's comprehensive cost of pig farming was 6.9-7 yuan/jin, and it is expected to continue to decrease in the fourth quarter."

New Hope Liuhe (000876.SZ) insiders revealed during the third-quarter performance conference call, "Looking at the fourth quarter, there is still room for a cost reduction of a few cents per catty for the company, with a high probability that by December the operating cost of our fat pigs could drop to below 14 yuan per kilogram."

Special treat Tianbang insiders stated in an interview with Caixin reporters, "Total cost = piglet cost + weight gain cost + expense allocation, the company still has cost reduction space in these areas, especially through restructuring to improve cash flow and increase production capacity utilization rate. After that, we expect that next year the complete fattening cost can be reduced to below 14 yuan, and the complete cost after normal production at full capacity in the future can be reduced to below 12 yuan."

DongRui Stock (001201.SZ) recently stated that the complete cost in September was 16.4 yuan per kilogram and the target for next year's complete cost is below 15 yuan per kilogram.

Of note, leading pig companies in cost control have already planned to target the 12 yuan cost range next year. China Animal Husbandry Group recently revealed, "By 2025, the target for the company's farming business cost control is: complete cost less than 13 yuan per kilogram."

Cost reduction and efficiency improvement are expected to become important guarantees for the profits of listed pig companies next year and act as a moat against future downturn cycles. Some analysts believe that based on sow data, the expected pig supply in 2025 is between the supply in 2023 and 2024, therefore prices may be higher than in 2023 but lower than in 2024. In addition to cost reduction and efficiency improvement, it is expected that there will still be profits in the breeding sector next year. Furthermore, the price increase of pigs is only a short-term bullish factor, while cost control is the moat for the long-term development of pig companies. Companies at the forefront of cost reduction effects are expected to maintain stable profits through efficient cost control during periods of low pig prices."

The aforementioned Special treat Tianbang personnel also stated, "The current pig farming industry is increasingly moving towards scale, and future industry competition will be a comparison of costs. The company's profit space depends on market pig prices and breeding costs. With the continued elimination and integration of redundant production capacity, the enhancement of full capacity utilization of advantageous capacity, and the promotion of cost reduction and efficiency improvement measures such as raising the level of biosecurity management, the profit space is expected to further expand, while the ability to resist cyclical risks will also be further strengthened."