Event: The company released its 2024 annual report. The company's revenue in '24 was 137.947 billion yuan, +24.43% year over year; net profit to mother was 17.881 billion yuan, turning a year-on-year loss into profit (loss of 4.263 billion yuan for the same period); net profit after deducting non-return to mother was 18.747 billion yuan, which turned a year-on-year loss into profit (loss of 4.026 billion yuan for the same period). Among them, 24Q4's revenue was 41.172 billion yuan, or +47.61%; net profit to mother was 7.4 billion yuan, which turned a year-on-year loss into profit (loss of 2.421 billion yuan for the same period); net profit after deduction was 7.526 billion yuan, which turned a year-on-year loss into a profit (loss of 2.311 billion yuan for the same period).

The company's revenue and performance increased rapidly in '24, and gross margin improved dramatically. The main reason for the significant improvement in the company's performance in '24 is that pig farming boom has increased, pig prices have been running high before and after, and the company's breeding costs have continued to be optimized. The company's comprehensive gross profit margin in '24 was 19.05%, +15.94 pct year on year; the cost ratio for the period was 6.64%, or -2pct year on year. The 24Q4 company's comprehensive gross profit margin was 23.25%, +24.66pct year on year; the cost ratio for the period was 5.14%, -4.43pct year on year.

The volume and price of the company's pig breeding business increased in 24, and plans to list 72-78 million commercial pigs in '25. In 24, the company listed a total of 71.602 million pigs (+12.2% year over year), including 65.477 million commercial pigs, 5.659 million piglets, and 0.465 million breeding pigs; it is estimated that the average sales price of commercial pigs was about 16.5 yuan/kg, +13.91% over the same period last year. The company's pig breeding business achieved revenue of 136.229 billion yuan, +25.88% year over year; gross profit margin was 19.21%, +15.94 pct year on year. In 24 years, the company continued to improve the level of fine management. The total cost of pig breeding throughout the year was about 14 yuan/kg, and dropped to 13 yuan/kg by the end of 24. 24Q4 listed about 21.459 million pigs (+27.69%), including 20.346 million commercial pigs, 1.053 million piglets, and 0.06 million breeding pigs; it is estimated that the average sales price of commercial pigs was about 16.23 yuan/kg, +16.93% over the same period last year. By the end of '24, the company's fixed assets, projects under construction, and productive biological assets were 106.751 billion yuan, 2.018 billion yuan, and 9.355 billion yuan, respectively, -4.81%, -12.57%, and +0.43%; the company's balance ratio was 58.68%, -3.43pct year on year, and +0.3pct at the end of 24q3, showing an overall improvement trend. By the end of 2024, the company had a farming production capacity of about 81 million heads/year. In 2025, the company expects to sell 72-78 million pigs and 8-12 million piglets.

The company's revenue from slaughtering meat was +11% year-on-year, and has achieved a monthly profit. In 24 years, the company slaughtered a total of 12.5244 million pigs and sold 1.4159 million tons of fresh and frozen pork products; slaughter and meat products contributed 24.274 billion yuan in revenue, +11.03% year on year; gross profit margin was 1.03%, +0.86pct year on year. At the end of '24, the company put into operation a total of 10 slaughterhouses, with a slaughter production capacity of 29 million heads/year. In 24 years, the company has continued to build a national pork sales network, and has set up more than 70 service stations in 20 provincial administrative districts across the country; through continuous optimization of customer structure and product structure, the company achieved monthly profit in December '24. In 25 years, the company will continue to improve the utilization rate of production capacity and enhance the profitability of the meat slaughter business.

Investment advice: The company is a leader in the pig breeding industry and has leading pig breeding cost advantages. Considering the continuous optimization of the company's breeding efficiency/cost in subsequent years, pig prices are running relatively smoothly, and the company's pig breeding profits may be expected.

We expect the company's EPS to be 3.47 yuan and 4.80 yuan respectively in 2025-2026, corresponding to PE of 11 times and 8 times, maintaining the “recommended” rating.

Risk warning: risk of animal diseases and natural disasters; risk of fluctuations in raw material supply and price; risk of fluctuating pig prices; risk of policy changes, etc.