The Zhitong Finance App learned that China Post Securities released a research report indicating that, according to data released by the National Bureau of Statistics, the number of sows that could be raised at the end of the first quarter was 39.92 million, or -1.2% month-on-month in March, which means that the industry's production capacity continued to decline in March. However, according to data from the three parties, there was a month-on-month increase in the number of breeding sows in March. The month-on-month data for Steel Union agricultural products and surges were +0.22% and +1.57%, respectively. The division between the official and third parties, or mainly due to statistical caliber. Moreover, currently pig prices have not yet entered the profit range, so there is no need to worry about the loss of production capacity as a result.

Because after 23 years of deep losses, companies' demands to ease debt pressure will be more urgent, and at the same time, they will be more cautious about expanding production capacity. Furthermore, the current production capacity situation affects the 25-year pig supply, while the 24-year supply was mainly determined by 23.

Supply has declined, and pig prices are expected to improve month-on-month in '24. After the Spring Festival, pig prices surpassed expectations, but there was no obvious benefit on the consumer side, indicating that the industry's production capacity reduction in the fourth quarter of last year exceeded expectations, leading to a decrease in pig supply at this stage. According to monitoring by the Ministry of Agriculture and Rural Affairs, starting from October 2023, the number of newborn piglets in the country has declined year on year, which means that after May '24, the number of pigs released will decrease year on year, and pig prices may rise further in the second half of the year.

Quantitatively, they all increased month-on-month. Seventeen listed pig companies released a total of 12.76 million pigs in March, an increase of 14.9% over February and a slight increase of 3.1% over the previous year. In January-March, listed companies released a total of 37.5 million pigs, an increase of 7.6% year on year; however, the number of pigs released nationwide decreased by 2.2% year on year. Pig prices have continued to be sluggish for a long time, and the overall production capacity of the industry has been reduced. Among them, production capacity invested in the early stages by large groups is still being released. Small and medium-sized production capacity is the main force behind the removal, and industry concentration continues to increase.

In terms of price, the off-season is not easy. The average listing price of the 14 listed companies in March was 14.55 yuan/kg, up 4.08% from February. The rise in off-season pig prices is mainly due to the accelerated loss of production capacity in the industry in the fourth quarter of last year, a decrease in the supply of large pigs in the market, reluctance on the farming side to sell, and difficulties in collecting pigs at slaughterhouses.

In terms of weight, continue to gain weight. The average weight of pigs released by the 10 listed companies continued to rise, to 117.5 kg/head. The weight of live pigs has increased steadily and is now at a normal level.

China Post Securities pointed out that the pig industry is currently fully adjusted, and company valuations are at the bottom of history. It is recommended to choose targets with outstanding cost advantages and take into account growth. 1) The cost advantage of leading companies is relatively obvious, and listing is more certain. Recommended attention: Makiyuan Co., Ltd. (002714.SZ), Wen's Co., Ltd. (300498.SZ). 2) Small and medium-sized enterprises are growing faster, and there is more room for cost reduction. Recommended attention: Superstar Agriculture and Animal Husbandry (603477.SH), Huatong Co., Ltd. (002840.SZ), Tiankang Biotech (002100.SZ), and Tang Renshen (002567.SZ).

Risk warning: the risk of animal diseases and the risk of fluctuating raw material prices.