The company is a pig breeding business listing platform under the Hunan Provincial State-owned Assets Administration Commission. As the “National Pig Team”, Xinwufeng has reserved sufficient resources for expansion and achieved a growth rate of more than 100% in 2022. In the future, it is expected to achieve rapid high-quality expansion in the new cycle, and grow into a “Hunan No. 1, Domestic Leading” regional leader in the entire pig industry chain.

Production capacity removal is expected to accelerate under low pig prices, and a cycle reversal can be expected. In the next six months, against the backdrop of excessive supply and poor demand, pig prices may continue to be low, and the low demand season after the Spring Festival will not rule out a further drop in prices. At the same time, long-term losses may have led to tight cash flow in the industry. We believe that against the backdrop of gradual deterioration in cash flow, continued sluggish pig prices will lead to accelerated loss of production capacity and strong sustainability. The second half of 2024 may usher in a new upward cycle, with a strong boom throughout '25. Corresponding to the investment level, 2023 proved that the investment layout at the bottom of asset prices and the bottom of the industry cycle can achieve relatively good returns. Currently, pig production capacity is being removed faster than in 2023, the direction is more clear, and the sector's valuation is still at an all-time low. We believe that the pig cycle has already ushered in a key layout period, and the market can be expected for the next six months.

There are plenty of expansion factors, and the company has embarked on a path of high growth: the company operates as the “National Pig Team” and has sufficient preparations for the four elements of “rich pig”, which will become an important force in the Group's “14th Five-Year Plan” production capacity target of 12 million pigs. 1) In terms of capital, Xinwufeng, as the only “national pig team” under the Hunan Provincial State-owned Assets Administration Commission with the pig industry as its main business, is backed by the Hunan Agricultural Group. The expansion capital is guaranteed, and the group shareholders have participated in the fixed increase several times to provide financial support; 2) In terms of talent, the company's management, represented by Chairman Wan Qijian, has always been deeply involved in the industry and has a deep understanding of the industry. The digital transformation of the company's industry continues to help improve production and operation efficiency. The number of sows raised per capita in third-generation pig farms increased by 50, while the company's incentive mechanism and talent echelon construction were relatively complete at the end of the year. Production personnel have arrived More than 2,300 people, with a year-on-year growth rate of about 80%; 3) In terms of pig breeding, self-built farms continued to grow, and rental farms were rapidly expanding. By the end of the first half of '23, the production capacity of leased piglets had reached 5.5 million heads. In '23, the company will add 36 new rental farms, and increase the storage scale of sow farms to 300,000 heads, which can reach 7 million piglets and about 4 million fat pigs; 4) In terms of breeding pigs, in the context of normalization of non-fever prevention and control, the company's ability to raise sows has become more and more important. Continuous investment in breeding and self-construction The breeding system. The pig breeding system will be further strengthened after the acquisition of Tianxin Breeding. It is estimated that the company will be able to breed more than 250,000 sows by the end of 23 years. The company has firmly grasped the most important aspects of pig breeding, which will support the rapid growth of its production scale and continuous optimization of costs, and the company has embarked on a path of high growth.

Investment advice: Xinwufeng operates as the “National Pig Team” with obvious advantages in the breeding system, perfect management mechanisms, and improved efficiency through digital transformation. We expect the company's pig release scale to grow rapidly, and it is expected to achieve leapfrog development with 3.2 million, 5 million, and 8 million heads released in 23-25 years. The company is expected to achieve revenue of 6.062 billion yuan, 9.625 billion yuan, and 15.701 billion yuan respectively in 23-25 years, with year-on-year increases of 22.9%, 58.8%, and 63.1% year-on-year net profit of -1,105 billion yuan, 74 billion yuan, and 1,695 billion yuan, respectively. The corresponding EPS is -0.88 yuan, 0.06 yuan, and 1.34 yuan respectively. Refer to the company's historical valuation and similar comparable company valuations to give pig enterprises with a rapid growth period The 25-year 11XPE, corresponding to the target price of 14.74 yuan, was covered for the first time, giving it a “strong push” rating.

Risk warning: Production capacity loss fell short of expectations, pig prices fluctuated greatly, large-scale uncontrollable epidemics broke out, extreme climate disasters caused large-scale crop production cuts and boosted food prices. The increase in the scale of the company's listing fell short of expectations, and the company's breeding costs fluctuated greatly.