Pig prices are picking up, costs are falling, leading pig companies such as New Hope and Wen's Co., Ltd. have successively achieved profit and loss balance in a single month, and the industry as a whole is returning to the breeding break-even line.
All relevant business sources said that in the future, ensuring profit will be the primary consideration to achieve high-quality enterprise development.
“Looking at it now, the company as a whole had a break-even balance in April, which is a very good sign. In particular, the company's backup sow conversion costs have room for rapid decline in the future.” Chen Xingyao, vice president of New Hope, said.
He expects the improvement in production and operation to be fully reflected after the second quarter.
According to the CITIC Securities Research Report, expectations for the rise in pig prices since 2023 have failed many times, and the pig breeding sector has been losing money for 5 consecutive quarters. However, as feed prices fell to a high level in 23Q3 and superposition efficiency improved, the industry continued to cut costs, and the 24Q1 sector reduced operating losses. Costs of Wen's shares, Shennong Group, etc. declined significantly from month to month, with an average loss of 140-160 yuan, ranking first in the industry.
As the market continues to be sluggish, corporate expansion has further slowed. 23Q4/24Q1 sow production capacity has declined steadily and capital expenditure is expected to decline further year on year in 2024. Corresponding to this, the industry continued to increase monetary capital reserves in the context of high debt. The average balance ratio at the end of 24Q1 was 67.0%, up 5.7 pcts year on year, up 1.0 pcts month on month, and debt ratio reached a record high.
Looking ahead to the continuation, the elimination of early production capacity transmission, combined with the recent decline in weight and inventory removal, CITIC Securities expects the cycle to be inflected.
Breeding and animal husbandry related enterprises:
COFCO Jiajiakang (01610): COFCO Jiajiakang is betting on a rebound in pig prices to buck the trend and expand production. On April 18, COFCO Jiajiakang officially started construction of the 662,400 green and healthy pig breeding project in Taonan City, Jilin Province. The total investment of the project is about 10 billion yuan, and the entire green ecological pig breeding industry chain project of 3 million heads will be launched in installments. The first phase of the project will invest a total of 2,014 billion yuan to build a breeding base with 662,400 pigs per year and supporting ancillary facilities.
Wanzhou International (00288): Wanzhou International accounts for a high proportion of overseas business. CICC pointed out that Wanzhou's profit performance in the first quarter of fiscal year 2024 beat market expectations, mainly due to a marked decrease in losses in the US pork business. Revenue for the period fell 8.3% year on year; operating profit increased 37.3% year on year; core net profit to mother increased 73% year on year. Among them, the operating profit of the Chinese market fell 10.4% year over year. As for operating profit in the US and European markets, the year-on-year increase was 208.1% and 156.5%.