The Zhitong Finance App learned that Guolian Securities released a research report stating that judging from the pace of investment in the right-hand sector of history, they are nothing more than concerned about the inflection point (already revealed) and height (sustainability) of the pig market. Considering that the decline in production capacity has continued over the past year, the current funding situation on the breeding side has not been recovered, and the upcoming rainy season is also putting pressure on the prevention and control of swine disease in the south. Currently, the market on the right side is still in its infancy, and continuity is still sufficient. As far as individual stocks are concerned, the focus should be on the degree of implementation, including the cashout of listing volumes and improvements in farming performance, and focusing on targets that are still below the historical center valuation quantile.

Related targets: We recommend Muyuan Co., Ltd. (002714.SZ), Wen's Co., Ltd. (300498.SZ), Xinwufeng (600975.SH), Tiankang Biology (002100.SZ), etc.; also recommend post-cycle animal protection and feed sectors, such as Haida Group (002311.SZ).

The main views of Guolian Securities are as follows:

Yongyi Consulting's inventory of breeding sows increased month-on-month in March

According to Yongyi Consulting data, sample point 1 in March (full sample data) was able to breed sows +1.57% month-on-month (previous value +0.28%). In this month's breeding structure, the increase in small to medium pig breeding farms was higher than that of large-scale farms. ① After the early stage, small to medium pig breeding groups purchased large back-up pigs from large-scale farms were bred one after another, and few entered production; ② based on optimistic expectations of future pig prices and the strong reality of piglet prices, some medium-sized pig farms increased backup and capable sow storage. In recent years, small and medium-sized farmers have been flexible in farming. This group's ability to prosper is mostly short-term speculation rather than long-term capacity expansion.

Mysteel's breeding sow inventory increased month-on-month in March

According to Mysteel data, in March 2024, the total sample breeding capacity of sows was +0.22% month-on-month (previous value -0.28%). Among them, large-scale breeding sows were +0.11% month-on-month (previous value -0.26%), and small to medium breeding sows were +3.94% month-on-month (previous value -0.90%). According to Mysteel's feedback, ① the epidemic in the north is stabilizing. In many places, damaged enterprises have resumed production in small increments; ② the growth rate of the southern market is relatively slow. Some large-scale enterprises in South China are affected by limited financial pressure and consistent expectations in the future. There is a reverse reduction in production capacity, but the overall impact is not significant.

The price of fattening pigs is expected to gradually rise

In the short term, as the price spread narrows, the breeding side's willingness to press the market weakens, and the pace of fattening pigs may accelerate, compounding the impact of off-season consumption, pig prices may fall in stages; considering that secondary breeding has not yet formed a centralized entry situation this year, it is mostly a batch cycle operation. The pig price is around 15 yuan/kg or a watershed moment in the current Eryu pig capture sentiment. Based on the optimistic expectations of the future market, secondary fattening is still expected to support pig prices in the future market. In the long run, the reduction in production capacity in the early stages will gradually reduce supply in the future. Combined with the arrival of peak consumption seasons such as May 1st and Dragon Boat Festival, demand is expected to increase. Overall, pig prices are expected to rise from the bottom.

Breeding sows may be kept or gradually increased

① Currently, the average sales price of 7 kg piglets exceeds 500 yuan/head. Above the cost line for weaned piglets in the industry, piglet sales are relatively profitable; ② considering that the breeding side is optimistic about pig price expectations in the future market, the combined feed costs have declined to a certain extent from the previous high point, and fattening pig farming is expected to gradually return to profit; ③ The current swine disease situation is relatively stable. Looking ahead to the future market, unless the rainy season in the south causes serious spread of the epidemic, the impact of swine disease on the loss of production capacity will weaken marginally. Taken together, the breeding side is able to breed sows, and may show a steady and slight increase trend.

Risk warning: the risk of an epidemic, the risk of pig prices being low for a long time, and fluctuating raw material prices.