According to Zhuochuang information, as pig prices rose after the Spring Festival holiday, self-breeding pigs and fattening piglets all returned to profit in mid-March.
However, due to the low cost of raising piglets in the early stages, the profit from raising piglets is currently higher than the self-breeding and self-raising model. There may still be room for pig prices to rise in the second quarter, and profits from self-breeding and self-raising may continue to rise.
Everbright Securities believes that the current inflection point in pig prices has arrived. As the contraction in the number of newborn piglets since October '23 is in place, it is expected that commercial pig sales will continue to shrink in April, supporting the gradual upward trend in pig prices. However, the current financial pressure on the industry is still increasing.
Based on an analysis of pig companies' sales in the past six months, Everbright Securities expects that the debt ratios of some pig companies will continue to grow in 23Q4 and 24Q1. In a situation where the balance ratio is high, the financing environment will deteriorate further, and the industry's balance sheet will converge more and more significantly. It is not ruled out that production capacity will continue to be eliminated in the face of rising pig prices.
China Post Securities released a research report saying that due to the impact of the Spring Festival, the average monthly sales volume of listed pig companies declined in January-February, but prices rebounded from low prices and weight gain, and individual losses are expected to decrease. At the same time, from September 2023 to February 2024, the number of newborn piglets continued to decline, which means that the supply of fat pigs will also decrease after 5 months (corresponding to the second half of 24 years).
Although supply has declined, there is no obvious advantage on the demand side, and there is currently a lot of pressure to remove frozen meat from storage. It is expected that the rise in pig prices in the second half of the year will be very limited.
Currently, industry company valuations are at the bottom of history, which is a good time for the layout section on the left. It is recommended to choose targets with outstanding cost advantages, and then take into account growth.
Hong Kong stocks related to the pig industry concept:
COFCO Jiajiakang (01610): The company released 5.2 million pigs in 2023, slightly exceeding the target at the beginning of the year. By the end of 2023, the company's breeding capacity was 6.17 million heads.
Wanzhou International (00288): In the first three quarters of 2023, Wanzhou International's European business performed better than in other regions. Considering that US business losses are expected to narrow, the agency expects a strong rebound in 2024.