Incident: The company's revenue for the first three quarters was +11.62%, with a loss of 911 million yuan. The company achieved operating income of 20.87 billion yuan (+11.6% year-on-year) and loss of 911 million yuan in the first three quarters of 2023; in the third quarter alone, it achieved operating income of 7.390 billion yuan (+1.07% year-on-year), with a loss of 247 million yuan.

The number of pigs released by the company is growing rapidly, and the feed business is operating steadily. In the first three quarters of 2023, the company released 2,6309 million pigs, an increase of 84.87% over the previous year, of which 971,500 were released in Q3, +73.5% over the same period last year. Q3 The average price of pigs rebounded due to sentiment, and the company's average sales price of fattening pigs also increased. In the first three quarters of 2023, the company's pig business achieved revenue of 4.167 billion yuan, an increase of 68.01% over the previous year; of this, Q3 achieved 1.56 billion yuan, +26.5% year-on-year. The company's feed business operated steadily. The company achieved a total of 5.04 million tons of internal and external feed sales in the first three quarters, an increase of more than 10% over the previous year.

The cost of pig breeding is steadily declining: 1) The company continues to optimize the pig breeding system and improve production efficiency. The company expects that if all pig breeding is completed, it can meet the release of 10 million commercial pigs in the year; at the same time, leveraging the advantages of large-scale procurement to increase production capacity utilization, it is expected that breeding costs will still improve. We expect the full cost of reproduction in Q3 to drop to 17.5 yuan/kg, down from Q2. 2) The company's pig production capacity is basically stable. As of 2023Q3, the company's productive biological assets are 548 million yuan, +17.07% over the same period; construction is 983 million yuan, supporting future launch plans; and the company's 2023/2024 launch volume target is 350/5 million heads. 3) The company's capital is relatively safe. Due to the business layout of the entire industry chain, the company's net operating activity in 2023Q3 was 230 million yuan, +12.58% year-on-year, with monetary capital of 2,933 billion yuan as of 2023Q3.

Investment suggestions: The company focuses on the three major industries of breeding, feed, and meat products. Synergies are increasing, the farming business is growing rapidly, and costs are declining steadily. We expect the company to achieve operating income of 287.4/342.3/381.7 billion yuan in 2023-2025, net profit of -9.1/2.4/4.4 billion yuan, and the closing price on October 31 corresponding to 24/25 PE of 40.1/22.0 times, maintaining the “increase in ownership” rating.

Risk warning: risk of pig disease; risk of pig release falling short of expectations; risk of price fluctuations of bulk agricultural products.