According to Zhito Finance APP, Dongxing Securities released a research report stating that the average sales price of hog farming companies decreased month-on-month in October, with muyuan foods, wens foodstuff group, and new hope liuhe achieving average hog sales prices of 17.17, 17.64, and 17.37 yuan per kilogram respectively, with month-on-month decreases of 7.94%, 7.40%, and 7.66%. From a periodic perspective, there is a situation where group companies deliver on slaughter volume and the industry is experiencing weight gain due to delays, while on the demand side, with the weather getting cooler and traditional consumer consumption like preserved pork, the interplay between supply and demand is strong, which may lead to a periodical price rebound in the future. It is recommended to pay attention to leading companies in the cost industry with high performance realization.

The main viewpoints of Dongxing Securities are as follows:

Sales data of listed companies in October:

The average sales price has adjusted. The average sales price of hog farming companies decreased month-on-month in October, with muyuan foods, wens foodstuff group, and new hope liuhe achieving average hog sales prices of 17.17, 17.64, and 17.37 yuan per kilogram respectively, with month-on-month decreases of 7.94%, 7.40%, and 7.66%.

The slaughter volume mainly increased. A total of 14.15 million pigs were slaughtered by 17 listed pig companies in October, a month-on-month increase of 14.61% and a year-on-year increase of 12.21%. In October, muyuan foods, wens foodstuff group, and new hope liuhe achieved hog sales volumes of 650,000, 267,000, and 125,000 respectively, with month-on-month changes of 21.28%, 6.43%, and 5.12%.

The average slaughter weight has significantly increased. Among the companies that have announced monthly slaughter weights, muyuan foods, wens foodstuff group, zhejiang huatong meat products, and shenzhen kingkey smart agriculture times reported a month-on-month increase in slaughter weight.

The third quarter report shows significant profits in hog farming. With declining costs and rising prices, various hog farming enterprises have seen their performance improve year-on-year significantly, and the certainty for strong annual performance growth is high. Muyuan foods achieved a net income of 10.481 billion yuan in the first three quarters of 2024, a year-on-year increase of 668.90%; Wens foodstuff group achieved a net income of 6.408 billion yuan in the first three quarters of 2024, a year-on-year increase of 241.47%. Leading farming enterprises with cost advantages have realized considerable performance, continuously leading the industry, and possess a competitive edge to capture excess returns in the long term.

Industry supply and demand performance: In October, pork prices initially rose and then fell, with an average price adjustment compared to the previous month.

According to monitoring data from the Ministry of Agriculture and Rural Affairs, the average prices for piglets, live pigs, and pork in October 2024 were 36.37 yuan/kg, 18.25 yuan/kg, and 29.85 yuan/kg respectively, with year-on-year changes of 32.15%, 14.79%, and 14.74%, and month-on-month changes of -12.24%, -7.39%, and -4.98%.

Supply side: As farming profitability declines, sales enthusiasm increases, coupled with previously stockpiled hogs entering the market, the number of hog sales in October has increased, leading to a relatively loose supply side. Consumer side: Breeding pigs entered the market in early October, supporting a slight rebound in prices; however, the purchasing ability on the demand side is weak, with sluggish movement of the dressed pigs. The animal slaughter operating rate saw a slight increase, with the hog slaughter operating rate rising by 0.58 percentage points in October to 28.04%, and the price difference for live pigs standing at 5.14 yuan/kg, with the consumer side unable to fully absorb the supply pressure.

Trends in production capacity change:

From data from three parties, the stock of breeding sows maintained an upward trend in October, with Yongyi and Ganglian sample data increasing by 0.56% and 0.39% respectively. Prices for hybrid sows and piglets have significantly adjusted downwards, leading to a cautious sentiment in the breeding sector. There is a rising trend of local epidemics, suggesting continuous monitoring of fall and winter epidemics; it is expected that the replenishment will be cautious and the production capacity will continue to oscillate at a low level, with not overly pessimistic expectations for 2025 pork prices and reasonable profitability expected in the farming sector.

Investment advice:

From a phased perspective, the supply side will see large enterprises fulfill their sales volume by the end of the year, and the industry will see heavier stockpiling. On the demand side, with the weather getting cooler and traditional consumption such as preserved meat increasing, the upcoming market might see a phase of price rebound due to the robust interplay between supply and demand. It is determined that the annual profitability scale of farming enterprises this year is considerable, and it is hoped that 2025 will sustain profitability within a reasonable range, with the duration of prosperity expected to exceed market expectations. For symbols, it is recommended to pay attention to leading enterprises in the cost industry with high performance realization rates, such as Muyuan Foods, along with other related symbols including Wens Foodstuff Group (300498.SZ), Tecon Biology Co.Ltd (002100.SZ), Tangrenshen Group (002567.SZ), Leshan Giantstar Farming & Husbandry Corporation (603477.SH), Zhejiang Huatong Meat Products (002840.SZ), etc.

Risk warning: Risks of livestock and poultry price fluctuations, the expected expansion of listed companies' sales volume not meeting expectations, risks of animal diseases, and companies' cost control not meeting expectations.