The Zhitong Finance App learned that Changjiang Securities released a research report indicating that the growth rate of major listed aquaculture companies declined month-on-month in the first quarter, mainly affected by the Spring Festival holiday and the month-on-month decline in productive biological assets of breeding companies in 2023Q2. In March, the total number of commercial pigs released by the nine major breeding companies increased markedly from month to month, up 5.2 kg from the beginning of February. At the same time, the average sales price of breeding enterprises increased 4.5% month-on-month in March, and some high-quality breeding enterprises with cost advantages are expected to reduce losses month-on-month in March. The inflection point of the current pig cycle is being prepared. The entire breeding sector is within 10% of the historical average market capitalization. We are optimistic about investment opportunities in the breeding sector. We focus on recommending Muyuan Co., Ltd. (002714.SZ), Wen's shares (300498.SZ), Superstar Agriculture and Animal Husbandry (603477.SH), and Shennong Group (605296.SH).
The main views of Changjiang Securities are as follows:
The number of sales of major breeding companies declined month-on-month in the first quarter
The total number of pigs released by major listed breeding companies in the first quarter reached 36.18 million heads, an increase of 8.0% year on year and a decrease of 9.6% month on month. Excluding the increase in the number of piglets released, major breeding companies released a total of 34.22 million heads in the first quarter, up 8.1% year on year and 10.2% month on month. Among them, the listing volume of 10 companies all increased to varying degrees over the same period last year. The fastest year-on-year growth rate was Shennong Group. In addition, Wen's shares, Huatong shares, Tang Renshen, and Muyuan shares increased by 28%, 23%, 21%, and 16%, respectively. The year-on-year growth rate of the remaining 5 farming companies in the first quarter was negative. The biggest drop was Zhengbang Technology, which fell 47% year over year, while COFCO Jiajiakang and Aonong Biotech also saw declines of more than 30%.
Changjiang Securities said that on a month-on-month basis, with the exception of Dongrui Shares, Shennong Group, and Huatong Co., Ltd., most companies experienced a month-on-month decline in the first quarter. On the one hand, the Spring Festival holiday in the first quarter had an impact on sales; on the other hand, after the second quarter of 2023, due to falling pig prices, breeding companies continued to lose money, and the productive biological assets of major breeding companies fell 1.0% month-on-month in 2023Q2, leading to a month-on-month decline in the number of breeding companies listed in the first quarter of 2024.
The weight of listing in March increased markedly, and the average listing price of breeding companies rose slightly
The average weight of commercial pigs released by most breeding companies increased significantly in March. From January to March 2024, the average weight of the nine major listed breeding companies was 113.2, 115.6, and 120.8 kg, respectively, showing a month-on-month increase. The average number of pigs released in March increased 4.5% month-on-month. Among them, the March listings of Tianbang Shares and Muyuan Shares all showed significant month-on-month increases, rising 19.5% and 8.3% respectively.
According to statistics from Yongyi Consulting, as of April 11, the average weight of pigs released in the country during the week was 126.03 kg, up 0.67 kg from last week. Mainly due to the expected rise in pig prices and low feed prices, the increase in pressure and secondary fattening were all heavy. Judging from sales prices, the average sales price of major breeding companies remained around 14.5 yuan/kg in March, up 4.5% from month to month. As pig prices rose in March, the loss situation of breeding companies may improve, but due to cost differences, loss margins, or differentiation between different enterprises, high-quality breeding enterprises with cost advantages are expected to reduce losses month-on-month in March.
The inflection point of the cycle is being prepared, and I am optimistic about investment opportunities in high-quality farming stocks
The inflection point of this pig cycle is being prepared. The decline in breeding capacity from 2023 will gradually be reflected in the 2024 commercial pig supply. Overall, this year's supply will show a marginal trend of high and low. Changjiang Securities believes that large-scale enterprises with high costs and high leverage will continue to lose production capacity in the first half of the year, thereby increasing the cumulative reduction in production capacity in the pig breeding industry. Currently, the aquaculture sector as a whole is within 10% of the historical quantile of the average market capitalization. The stock price position is low. The first half of the year's sector looks at valuation repair, and profit recovery in the second half of the year. Optimistic about investment opportunities in the aquaculture sector, focusing on Muyuan Co., Ltd., Wenshi Shares, Superstar Farming and Animal Husbandry, and Shennong Group.
Risk warning
1. The impact of the outbreak of animal diseases has caused the scale of enterprise sales to fall short of expectations; 2. Additional policies and financial support have caused the pig breeding industry to lose production capacity; 3. Demand for pork has declined significantly in the short term; 4. Prices of raw materials such as corn and soybean meal have risen sharply.