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中信证券:去产能进入实质阶段 加大生猪板块配置

CITIC Securities: Removing production capacity and entering a substantial stage to increase pig sector allocation

Zhitong Finance ·  10/31/2023 09:12

Prices of fat pigs, piglets, and eliminated sows are falling rapidly, and the industry may enter a stage of substantial removal of production capacity.

The Zhitong Finance app learned that CITIC Securities released a research report saying that the prices of fat pigs, piglets, and eliminated sows are falling rapidly, and the industry may enter a stage of substantial elimination of production capacity. Currently, we are in the stage of removing production capacity from the pig cycle. Most listed companies have an average market value of only 1,000-3,000 yuan for the beginning of 2024. Currently, the stock price has low expectations for a reversal of the cycle and the company's growth. Negative sentiment has been fully released. It is recommended to seize the window of accelerated removal of production capacity and actively allocate it.

The main views of CITIC Securities are as follows:

Pig prices fell back to a loss range during the peak season, making it difficult to ease supply pressure in the short to medium term.

Since this year, pig prices have declined rapidly after experiencing a rebound in July, showing a typical peak season slump. Currently, they have even returned to a loss range. In some regions, pig prices have fallen below 14 yuan/kg. Looking ahead, due to the relatively high level of sow storage in the early period, compounded by the continuous improvement in sow breeding efficiency in recent years, relatively high body weight, and relatively high frozen product stocks, the bank expects that 23Q4-24H1 pig supply pressure will be difficult to ease. Coupled with weak demand, the rebound in pig prices is expected to be weak, and there is a risk that it will continue to decline after the Spring Festival next year.

Piglets continue to suffer deep losses, swine diseases are repeated, and production capacity has been reduced or increased.

In the post-plague era, although the industry accumulated rich profits in 2019-2020, the vast majority were used to expand recycling production. The industry continued to lose blood under the pressure of the epidemic and high farming costs, and moved forward under a heavy burden. However, pig prices, which have continued to be sluggish since this year, have caused the industry to lose money for a long time, and the average loss margin is already close to the 2021-2022 level, and it is still in a loss channel. Recently, the bank has observed simultaneous changes in the two indicators or indicates that the removal of production capacity has entered a substantial stage:

1) Piglet prices have continued to operate offline since July, and are currently in a state of deep loss. Piglet prices are close to the low since 2017, and pessimism in the industry is rapidly growing, which may lead to a gradual decline in sow production capacity.

2) Since October, swine diseases have been repeated in many parts of the north. Prices of sows eliminated have declined rapidly. The price ratio for sows scavenge/fat pigs is close to the previous low, and the number of sows eliminated has increased rapidly, which may accelerate the elimination of sow production capacity.

The valuation of the sector is low, so it is recommended to increase the allocation of the pig breeding sector.

In the history of the resumption of trading, the rise in stock prices in the pig sector mainly occurred in the two stages of capacity removal and pig price reversal. Amidst the sharp rebound in pig prices from 2021-2022, the stock price increase was even more obvious during the previous stage of capacity removal. Currently, we are in the stage of removing production capacity from the pig cycle. Most listed companies have an average market value of only 1,000-3,000 yuan for the beginning of 2024. Currently, the stock price has low expectations for a reversal of the cycle and the company's growth. Negative sentiment has been fully released. It is recommended to seize the window of accelerated removal of production capacity and actively allocate it.

Risk Factors:Pig prices fall short of expectations; removal of production capacity falls short of expectations; consumption falls short of expectations; changes in pig industry policy; extreme natural disasters; large-scale outbreaks of animal diseases; large fluctuations in prices of food and feed raw materials; and food safety issues.

Disclaimer: This content is for informational and educational purposes only and does not constitute a recommendation or endorsement of any specific investment or investment strategy. Read more
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