华泰证券:生猪拐点显现 24Q1饲料龙头&宠物板块迎开门红

Huatai Securities: Pig inflection point shows 24Q1 feed leader & pet sector welcomed a good start

Zhitong Finance ·  May 15 21:11

The profit side of the 4Q1 pig breeding sector has now reduced losses, and profits from leading feed and pet sectors have bucked the trend. It is recommended to grasp the two main lines of agricultural stock investment in 2024 accordingly.

The Zhitong Finance App learned that Huatai Securities released a research report saying that the profit side of the 24Q1 pig breeding sector has now reduced losses, and profits in the feed and pet sectors have bucked the trend. It is recommended to grasp the two main lines of agricultural stock investment in 2024 accordingly: the right-hand side of the pig cycle reversal (focusing on rising pig prices and profit realized), and high-profit stocks such as feed leaders and pet food sectors (focusing on the operating flexibility brought about by beta in leading market share and fish price reversal).

The main views of Huatai Securities are as follows:

Pig breeding: The financial pressure on pig companies is still high, and they are concerned about the reversal of pig prices

Huatai Securities pointed out that under the influence of low pig prices, the pig breeding industry and listed pig companies have been losing money for 5 consecutive quarters since 2023. Among them, 24Q1 listed pig companies have reduced their losses due to measures such as restructuring and financing to reduce costs. Under pressure from losses and high debt ratios, construction projects and productive biological assets of listed pig companies continued to decline in 2023, and overall capital expenditure contracted. The growth rate of listed pig companies in 23Q4 and 24Q1 continued to decline, shrinking pig companies increased markedly, and capacity expansion slowed. Combined with changes in sow production capacity and dynamic tracking of sales, it is expected that pig prices will rise and fall easily in the future. The pig cycle has already moved to the right, and pig companies listed in 24Q2 may reverse losses one after another. Judging from historical experience, in the reversal of the market, the stock price increase phase driven by the rise in pig prices on the right is more flexible. It is recommended to actively lay out the pig breeding sector, select low-cost pig companies, and undervalued pig companies concerned about the safety of debt ratios.

Feed leader: Feed farming is growing both at a high rate, and the advantages of the leading edge are obvious

Affected by the continued slump in downstream farming profits, the feed sector showed a trend where revenue and profit growth rates both declined quarterly and changed from increase to decline in 2023. Due to the fact that listed companies mostly operate pig breeding businesses, the net profit of the feed sector in 2023 turned into a year-on-year loss. The year-on-year decline in revenue in the 24Q1 feed sector increased, mainly due to factors such as lower raw material prices driven feed price reductions. The year-on-year profit growth rate was positive, mainly driven by high profit growth of leading companies, and the advantages of leading companies were evident.

Pet sector: Multiple overseas and domestic benefits, 24Q1 profit increased year-on-year

Driven by factors such as overseas customer inventory replenishment, the gradual restoration of export orders, the appreciation of the US dollar, a decrease in the cost of the main raw materials such as chicken and duck, and a year-on-year increase in revenue from domestic independent brands, the pet sector's revenue growth rate increased quarterly from 2023 to 2024Q1 (5 consecutive quarters), and profit was recovered quarterly (gradually shifting from a sharp year-on-year decline in 23Q1 to a year-on-year increase in 24Q1), and net profit growth of 32% and 243%, respectively. Looking back, Huatai Securities believes that there are still dividends on the domestic market circuit in the pet industry, and the recovery of overseas export business is expected to continue, while leading companies still have a lot of room to increase their market share. It is recommended to actively lay out leading domestic brands and focus on individual stocks with high performance flexibility.

Other: Seed performance was good during peak season, and the fundamentals of animal protection are still being sought

Driven by factors such as mergers, acquisitions and restructuring and improved management of leading companies, the year-on-year revenue growth rate in the seed sector in 2023 maintained double-digit growth for four consecutive quarters, and the profit growth rate was high during the peak season (23Q1 & 23Q4). Affected by factors such as the pace of revenue and cost confirmation during the sales season (23Q4-24Q3), revenue in the 24Q1 seed sector maintained double-digit year-on-year growth (adjusted caliber increased 0.5% year over year), but profits declined year-on-year due to corn seed delivery falling short of expectations. Affected by the continued slump in downstream farming profits, the animal insurance sector showed a trend of revenue and profit declining from quarter to quarter in 2023: net profit to mother in 2023 was about 1,727 billion yuan, a slight decrease of 0.97% year on year; 2024Q1 revenue and profit both still declined year on year, but the decline was narrower than 23Q4.

Risk warning: Livestock and poultry price performance, pig production/food price performance of listed companies fell short of expectations, the amplitue/speed of sow production capacity reduction fell short of expectations, agricultural support policies were not as strong as expected, etc.

Disclaimer: This content is for informational and educational purposes only and does not constitute a recommendation or endorsement of any specific investment or investment strategy. Read more
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