The Zhitong Finance App learned that Huaan Securities released a research report saying that pig prices have continued to weaken since 2023 due to a sharp increase in pig breeding efficiency and weak demand. The bank determined that the continued slump in pig prices is expected to accelerate the loss of production capacity. According to the number of pigs released in 2024, the average market value of Wenshitou is 3018 yuan, Muyuan is 3102 yuan, Superstar Agriculture and Animal Husbandry 4,300 yuan, Huatong Co., Ltd. 2,775 yuan, New Hope 2,329 yuan, Tiankang Biotech 2,033 yuan, and COFCO Jiajiakang 1,327 yuan. The valuation of leading pig companies in the first and second tier is at the bottom of history. They have been adjusted ahead of fundamentals. They continue to recommend the pig breeding sector, focusing on Wenshi Shares (300498.SZ), Muyuan Shares (002714.SZ), Superstar Agriculture and Animal Husbandry (603477.SH), Tang Renshen (002567.SZ), and Tiankang Biology (002100.SZ).

The views of Huaan Securities are as follows:

The mid-term trend in piglet prices is highly correlated with pig prices and profits

Generally speaking, piglet prices show seasonal characteristics. As farmers become more motivated to fill in the piglet list after the Spring Festival, the price of piglets will rise. Since 2000, with the exception of the downward cycle of pig prices in 2006, 2009-2010, 2013-2015, 2018, and 2022, piglet prices have all risen after the Spring Festival. Furthermore, in 2016-2017 and 2020-2022, piglet prices began to rise slightly before the Spring Festival. However, judging from the mid-term trend, piglet prices are highly correlated with pig prices and breeding profits.

The price of piglets rarely skyrocketed before the holiday season, and may show a downward trend after the holiday

Before spring, piglet prices skyrocketed. The main reasons include: ① Secondary fattening of piglets. The price increase for large-weight piglets was significantly higher than for small-weight piglets: On February 9, the average price of a 7-kilogram piglet sold at the Shanghai Steel Union market was 381.8 yuan/head, up 97% from the bottom of January 5; on February 1, the average price of a 15-kilogram piglet in Yongyi Consulting was 506 yuan/head, up 67% from the January 4 low; on February 6, Boya Hexun's average price of 15 kg piglets in 52 cities across the country was 33.6 yuan/kg, up 55% from January 8; on February 6, the average price of 20-kilogram piglets in 52 cities across the country was 29.2 yuan/kg. The bottom rose 44 %; ② Fill the list of low price piglets in order to obtain excess income through fattening; ③ Be optimistic about late-stage pig prices and actively fill in the list for piglets. On February 23, the price of a 7-kilogram piglet sold at the Shanghai Steel Union market was 454.76 yuan/head, a slight decrease of 0.2% compared to the previous month; on February 22, the price of a 15-kilogram piglet sold at 602 yuan/head at Yongyi Consulting's large-scale farm, up 19% from February 1; from February 20 to 23, the average price of 15 kg piglets in 52 cities across the country had stabilized at 39.6 yuan/kg for 4 consecutive days; if 7 or 15 kg piglets were purchased at the current price, whether 7 or 15 kg piglets were purchased at the current price, Individual retail investors or groups The stocking companies are all in a state of loss. The bank maintained its previous judgment. There is a low probability that the price of piglets will continue to exceed the break-even line, and it should fall along with the price of pigs.

Pig production capacity continues to decline in January 2024

Data from the Bureau of Statistics and the Ministry of Agriculture: Since December 2022, pig prices have continued to be low. At the same time, compounded by the impact of the January-February non-plague epidemic, the number of breeding sows has re-entered a downward channel. By the end of December 2023, the number of breeding sows had dropped by 5.6%. Shanghai Steel Union data: From December 2022 to January 2024, the cumulative decline in breeding sows was 6%. Among them, there was a month-on-month change of 0.75%, -0.15%, -0.17%, -0.22%, -0.16%, 0%, -0.49%, 0.02% 0.32%, -0.41%, -0.35%, -1.92%, -2.02%, -0.52%, -0.52%, a 14-month cumulative decline of 5.3%; the month-on-month change of breeding sows in small to medium sized households, -2.52%, -1.78%, - 1.21%, -1.89%, -1.81%, -0.29%, -3.01%, -0.06%, -0.42%, -3.08%, -2.05%, -4.09%, -1.93%, a 14-month cumulative decline of 24.6%. Yongyi Consulting data: The cumulative decline in breeding sows from December 2022 to January 2024 was 12.32%, a month-on-month change of -1.1%, -0.39%, -1.84%, -1.95%, 0.04%, -0.93%, -1.68%, -0.22%, 0.04%, -0.27%, -0.85%, -1.57%, -0.84%, -0.76%. Judging from the changes in the sow storage of listed pig companies, since December 2022, the overall storage trend has been increasing, and production capacity removal should mainly occur among small and medium-sized farmers.

1H2024 pig production capacity removal is expected to accelerate

In 2024, there was a sharp year-on-year increase in the number of pig companies listed in January. The 16 listed pig companies that have already announced a total listing volume of 7.99 million heads (Makihara only announced the total value for January-February), an increase of 39% over the previous year. Of course, since the 2024 Spring Festival is in February, there will be seasonal factors. According to data from the Bureau of Statistics and the Ministry of Agriculture, from January to June 2023, the number of breeding sows in the country increased by 1.8%, 1.8%, 2.9%, 2.6%, and 0.4%, respectively. At the same time, pig breeding efficiency improved in 2023. The bank roughly estimates that 1H2024 production efficiency is expected to increase by nearly 10% compared to 1H2023. The number of pigs released in 1H2024 is expected to increase 10% year-on-year, and pig prices are likely to fall below the level of the first half of 2023. According to pig Yitong data, the average price of 1H2023 pigs is 14.7 yuan/kg, the lowest price is 13.7 yuan/kg; among them, the average price of pigs in 2023Q1 is 15.0 yuan/kg, the lowest price is 13.3 yuan/kg, the lowest price is 13.7 yuan/kg, and the price of 1H2024 pigs is expected to drop below at least 13 yuan/kg. Hog prices continue to be sluggish, which is expected to accelerate the elimination of production capacity.

Investment advice:

Pig prices have continued to weaken since 2023 due to a sharp increase in pig breeding efficiency and weak demand. The bank determined that the continued slump in pig prices is expected to accelerate the loss of production capacity. According to the number of pigs released in 2024, the average market value of Wenshitou is 3018 yuan, Muyuan is 3102 yuan, Superstar Agriculture and Animal Husbandry 4,300 yuan, Huatong Co., Ltd. 2,775 yuan, New Hope 2,329 yuan, Tiankang Biotech 2,033 yuan, and COFCO Jiajiakang 1,327 yuan. The valuation of leading pig companies in the first and second tier is at the bottom of history. They have been adjusted ahead of fundamentals. They continue to recommend the pig breeding sector, focusing on Wenshi Shares (300498.SZ), Muyuan Shares (002714.SZ), Superstar Agriculture and Animal Husbandry (603477.SH), Tang Renshen (002567.SZ), and Tiankang Biology (002100.SZ).

Risk warning: Outbreak; pig price reversal later than expected.