Leading the cost control industry, releasing growth performance, and maintaining a “buy” rating

The company released its 2024 semi-annual report, with 2024H1 revenue of 2.233 billion yuan (YoY +13.13%) and net profit to mother of 0.045 billion yuan (+87.13% YoY). Single Q2 revenue was 1.284 billion yuan (YoY +18.89%), and net profit to mother was 0.093 billion yuan (+165.30% YoY). Based on the operation of the pig cycle and the pace of the company's launch, we lowered the company's 2024-2026 profit forecast. The company's net profit for 2024-2026 is 10.26/12.01/11.62 (the original forecast for 2024-2026 was 10.94/34.27/21.21, respectively) billion yuan, corresponding EPS was 2.01/2.35/2.28 yuan, respectively, and the PE corresponding to the current stock price is 8.9/7.6/7.8 times. The company is leading the cost control industry and continues to decline. The pig market has maintained a high growth trend for a long time and maintained a “buy” rating.

The company is leading the cost control industry, and the release of steady growth and the release of performance is imminent

2024H1's pig breeding revenue was 2.039 billion yuan, gross profit was 0.252 billion yuan, gross profit margin was 12.38%, and net profit was about 3.8 million yuan. 2024H1 pigs sold 1.0945 million, of which commercial pigs sold 1.0618 million (+24.69% year over year). The company is leading the industry in total cost control and continues to decline. The full cost of the 2024Q2 company is 14.06 yuan/kg, the 2024M7 has dropped to 13.92 yuan/kg, and the full cost of 2024H2 is expected to drop to 13.8 yuan/kg.

In terms of production performance, 2024M7's PSY is 29.67, piglets cost 276 yuan/head, and fattening survival rate is 92.5%. In terms of energy production, as of the end of August 2024, the company had 0.24 million breeding pigs, of which 0.14 million heads can be harvested, with a reserve of 0.1 million heads. It can grow steadily, and is expected to grow at 0.18 million by the end of the year. The company's pig sales have maintained a high growth trend for a long time. It is expected that 2024H2 pig prices will operate at a high level, and the company will enter a period of rapid release of performance.

The steady operation of the leather business controlled losses, and the company promoted the leather business in an orderly manner with sufficient capital: 2024H1 revenue 0.036 billion yuan (YoY -30.41%), gross profit -0.011 billion yuan (-7.07% YoY), gross profit margin -30.47% (YoY -15.00%). 2024H1's leather business lost 0.045 billion yuan. The loss is expected to decrease month-on-month in 2024H2. The loss for the full year of 2024 is expected to be within 0.08 billion yuan. Financial aspects: As of the end of June 2024, the company's balance ratio was 62.25%, and the book capital was 0.375 billion yuan. The company had sufficient capital, steady growth progressed in an orderly manner, and expanded steadily.

Risk warning: pig prices fluctuate greatly, the risk of animal diseases, and the decline in company costs falls short of expectations.