The company forecast a 24-year profit increase of 15.4-15.9 billion yuan to 9-9.5 billion yuan, in line with market expectations. The company announced the 2024 performance forecast. Net profit due to mother in 2024 was 9-9.5 billion yuan, an increase of 15.39-15.89 billion yuan over the previous year, achieving a deduction of 9.3-9.9 billion yuan in non-net profit, an increase of 15.75-16.35 billion yuan over the previous year. Based on the median forecast, 4Q24 achieved net profit of 2.84 billion yuan to mother, and the performance forecast was in line with market expectations. The company's performance was drastically reversed. On the one hand, production cost reduction and efficiency was achieved by focusing on basic production management and prevention and control of major epidemics; on the other hand, due to the recovery in pig prices and the increase in livestock and poultry sales this year.

Key points of concern

The release target has been achieved steadily. We expect the company to release pigs/broilers in 24 years or more than 30 millions/1.2 billion feathers. From January to November 2024, the company's livestock and poultry sales revenue was 86.57 billion yuan, +18.0% year-on-year. Specifically, 1) Pork pig business: Sales revenue from January to November 2024 was +33.9% to 55.79 billion yuan, the sales volume of pork pigs was +16.5% to 27.142 million heads, and the average price of hairy pigs was +12.4% to 16.8 yuan/kg; the company added sales of piglet products this year, with a sales volume of 1.0588 million heads. 2) Broiler business:

Sales revenue in January-November 2024 was -2.9% to 30.78 billion yuan, sales volume (including chicken, fresh products and cooked food) was +1.9% to 1.1 billion feather, and the average price of chicken was -3.4% to 13.22 yuan/kg.

Production efficiency optimization has built a low cost advantage, and the financial situation is steady and continuous improvement. 1) Cost side: The company's comprehensive cost of pork and pork in October was 13.4/11.4 yuan/kg, -2.2/-1.6 yuan/kg compared to the previous year.

2) Efficiency side: In terms of pork, production efficiency is close to the superior level before the plague. The market rate of pork pigs in October was 93%, +1ppt; PSY in May was about 23, +1 head compared to 23; the “pig seedlings cost reduction” project achieved remarkable results. The cost of pig seedlings in October was 290 yuan/head, down 80-90 yuan/head from the beginning of the year. On the broiler side, maintain industry-leading production efficiency. In October, the company's broiler breeding market rate was 95%, and the meat ratio was 2.75. 3) Financial situation: Balance endogenous capital health with shareholder returns. The balance ratio in October was 53-54%, down 7-8ppt from the end of 2023; 0.6 billion yuan was repurchased this year, and 0.99 billion yuan was paid back to all shareholders.

Taking the lead, we are optimistic about the low-cost and high-quality expansion of scarce breeding leaders, leading a new paradigm for pigs. 1) Industry: First, we judge that pig prices will fall slowly in 2025. The company's low cost is expected to be exchanged for profit space, and it is likely that it will be profitable throughout the year. Second, the company has the advantage of being extremely large and scarce to expand the scale of profits, and there is strong certainty that its share of listing will increase excessively. 2) Company: We are optimistic about the company's low-cost, high-quality expansion under the direction of steady operation. First, the company was able to breed sows +7% to 1.68 million at the end of October. We expect the company's pig production to increase by 10% and yellow feather chicken production by 5% in '25. Second, due to the continuous optimization of the pig breeding system and the continuous improvement of epidemic prevention and control management, we believe that the company's cost advantage is expected to continue.

Profit forecasting and valuation

Based on the 4Q24 pig price correction and the steady decline in pig prices in '25, net profit forecast was lowered by 8%/12% to 9.3/9.7 billion yuan in 24/25; net profit to mother was introduced by 11.9 billion yuan in '26, and the current stock price corresponds to 11/9 times P/E in 25/26. Based on the company's leading position and increased certainty in growth, the target price was maintained at 25 yuan, corresponding to 17/14 times P/E in 25/26, with 56% upward space. Maintain an outperforming industry rating.

risks

The risk of animal diseases such as non-plague; the risk that the company will be listed below expectations; the risk of rising feed costs.