The fourth “loss bottom” in the current cycle in 2024 is the first time since 2006 that there have been 4 “loss bottoms”, and the bottom of the cycle is expected to gradually come to an end.
The Zhitong Finance App learned that the research report released by Shanxi Securities indicates that according to March operating data released by key listed pig companies, the total number of listed pig companies listed increased by 28.63% month-on-month compared to February. The pace of listing has resumed. The listing volume of all 12 pig companies increased month-on-month in March. In terms of price, due to the overall pig price in the market, the average sales price of commercial pigs by listed pig companies in March rose 4.46% from February. Although pig prices and piglet prices showed an upward trend in March, the number of sows that can be bred at the end of the first quarter continued to decline compared to February. The internal funding situation in the pig breeding industry is not optimistic. It is recommended to focus on the influence of the financing side on the trend of loss of pig production capacity.
The main views of Shanxi Securities are as follows:
The fourth “loss bottom” in the current cycle in 2024 is the first time since 2006 that there have been 4 “loss bottoms”, and the bottom of the cycle is expected to gradually come to an end. The US pig industry still has an obvious pig cycle during the period of high scale. Currently, the scale of China's pig industry is still much lower than that of the US, and pig prices in China will still show cyclical fluctuations in the future. Due to industry practices such as secondary fattening, Shanxi Securities tends to believe that the high point of the future pig cycle is more likely to be higher than the high point of the normal cycle before the outbreak of “African Swine Fever” in 2018.
Referring to the experience of the first two cycles, the inflection point of the pig breeding index is generally 6-9 months ahead of the inflection point of the pig price cycle. The upward cycle of the pig breeding index often begins during or near the penultimate “loss bottom” period. It hasn't been until pig prices break out of the last “loss bottom”; the upward cycle of the pig breeding index has already been interpreted more than half. It can be seen from this that the penultimate “loss bottom” of the pig price cycle bottoming out stage or a better time to lay out large-scale pig breeding stock opportunities, not the last “loss bottom,” let alone wait until the breeding industry enters a profit period.
Whether looking at the 2024 reversal or the 2025 reversal, according to the rules of interpretation of breeding stocks, attention should be paid to the timing of pig breeding stocks at the fourth “loss bottom”. If the fourth “loss bottom” is the last bottom, the subsequent deductive logic of farming stocks may gradually move from the “capacity removal” stage to the “cycle reversal” stage. Under a pessimistic scenario, if the fourth “bottom of loss” is the penultimate bottom of loss, it is still a good time to lay out large-scale opportunities for pig breeding stocks.
Related targets: We recommend pig breeding stocks such as Wen's Co., Ltd. (300498.SZ), Tang Renshen (002567.SZ), Dongrui (001201.SZ), Shennong Group (605296.SH), Superstar Agriculture and Animal Husbandry (603477.SH), and New Hope (000876.SZ).
As upstream raw material cost pressure falls and downstream trends improve, Haida Group's worst period of the current cycle may have passed. Currently, the valuation is at the bottom of history. We recommend Haida Group (002311.SZ) for speculative opportunities.
Furthermore, according to the “loss period+low PB” strategy, Shengnong Development (002299.SZ) has already entered the allocation window.
Risk warning: risk of aquaculture epidemic; risk of natural disasters; risk of fluctuations in feed raw material prices.