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The agency said that the average market value of major listed pig companies has fallen back to the historical bottom level, and the value of investing in high-quality pig companies has been highlighted.

The livestock industry index has fallen to its lowest level since 2019

The livestock sector has been in a downturn recently. Data shows that since August 16, the Shenwan Livestock Industry Index has fallen for six consecutive days, with a cumulative decline of 10.9%. Yesterday, the Shenwan Livestock Industry Index once hit 2748.04 points during the trading session, the lowest point since 2019. Among the constituent stocks, Pengdu Agriculture and Animal Husbandry, Superstar Agriculture and Animal Husbandry, New Wufeng, Fucheng Shares, ST Tianshan and many other stocks have fallen by more than 50% this year.

In terms of the number of pigs slaughtered, in July 2024, 15 listed pig companies slaughtered a total of 12.63 million pigs, a slight increase of 0.8% year-on-year and a significant increase of 10% month-on-month. Among them, Muyuan shares, Da Bei Nong, and Jinxinnong saw a large month-on-month increase in the number of pigs slaughtered, at 22%, 30%, and 42%, respectively.

In terms of price, the average sales price of Muyuan Foodstuff's commercial pigs was 18.3 yuan/kg, a month-on-month increase of 3.21%; the average sales price of Wens Foodstuff's live pigs was 18.95 yuan/kg, a month-on-month increase of 4.7%; and the average sales price of Zhengbang Technology's commercial pigs was 18.5 yuan/kg, a month-on-month increase of 4.96%.

China Merchants Securities believes that under the current background of relatively lucrative breeding profits, the recovery speed of breeding sow stocks is slow, and the pig price is expected to run above the cost line for a longer time than market expectations. Corresponding to the 2024 slaughter volume, the average market value of major listed pig companies has fallen back to the historical bottom level, and the allocation value of high-quality pig companies is highlighted.

Many pig farming companies turned losses into profits in the first half of the year

Securities Times Databao sorted out the individual stocks of Shenwan Breeding Industry. As of August 23, 19 of them had released semi-annual reports.

In terms of net profit scale, Wen's Foodstuffs, ST Tianbang, Muyuan Foodstuff, Lihua Foodstuff, and Luoniushan ranked in the top five, with net profits of 1.375 billion yuan, 850 million yuan, 800 million yuan, 575 million yuan, and 275 million yuan in the first half of the year, respectively, and all of them turned losses into profits year-on-year.

Wens Foodstuffs said that the price of feed raw materials fell in the first half of the year, and the company's breeding costs fell year-on-year. In addition, the company's pig sales increased year-on-year, sales prices increased year-on-year, and the profit of pig breeding business increased significantly year-on-year, turning losses into profits.

In addition, although stocks such as Zhengbang Technology, Superstar Agriculture and Animal Husbandry, Dongrui Holdings, New Hope, and New Wufeng suffered losses in the first half of the year, their overall performance reduced losses by more than 50% year-on-year.

New Hope said that the pig market rebounded in the second quarter, and pig prices increased compared with the same period. Combined with the steady decline in breeding costs, the overall performance achieved a reduction in losses.

Zhengbang Technology also stated that benefiting from the recovery of the pig market and a sharp drop in costs and expenses, the company's performance has significantly reduced losses year-on-year.

From the perspective of the future market, the overall pork price in the second half of the year is optimistic. On the demand side, the reopening of schools in the third quarter, the cooler weather and the boost from the Mid-Autumn Festival will hopefully lead to a marginal improvement in pork demand; on the supply side, the decline in the number of breeding pigs in the second half of the year is increasing month by month, and supply pressure may be reduced at an accelerated pace.

Changjiang Securities pointed out that the supply gap objectively exists, while industry expectations are weak, which means that behaviors such as holding back pigs, secondary breeding, and large-scale restocking will occur less frequently, which is beneficial to the sustainability of pork prices.

Huaxi Securities said that as pig prices rise, the fundamentals of pig farming companies have improved, and profits are expected to expand further in the third quarter. It is recommended to continue to pay attention to targets with significant cost improvements and high elasticity in future output.