Zhitong Financial APP learned that Tianfeng Securities released a research report saying that reviewing the historical extent and speed of pig production capacity removal is mainly related to the duration and extent of losses, seasonal or sudden epidemic disturbance, and changes in the industry's breeding structure. Under the condition that the industry has experienced long-term losses in the early stage, the process of capacity removal in the industry may continue and attach importance to "forward-looking" opportunities. The valuation is at the relative bottom of history.The market capitalization of multiple stocks may still have significant room to rise.(data as of October 22).

The main points of ▍ Skywind Securities are as follows:

1. Analysis of the factors affecting the removal of historical production capacity.

Reviewing the historical range of capacity removal & speed, it is mainly related to the duration and extent of loss, seasonal or sudden epidemic disturbance, and the change of industry culture structure. Factor 1: usually, the longer the loss time, the greater the cumulative capacity removal, and when both the breeding end (self-breeding head profit) and the breeding end (piglet head profit) enter the state of loss at the same time, the rate of capacity removal will be accelerated.

The second influencing factor: the more serious the sudden-seasonal epidemic is, the greater the range of capacity removal is. The disturbance of epidemic disease in the past will affect the amplitude and rhythm of capacity removal. For example, when 18 years of non-plague comes, the amplitude and speed of capacity removal will show signs of obvious acceleration.

The third factor: the change of culture structure will affect the extent-speed of capacity removal. In the period when the proportion of retail investors is relatively high, the ability of retail investors to resist risks is weak, which leads to the accelerated elimination of production capacity in the early stage of losses. however, with the acceleration of the process of scale in the industry, the anti-risk ability of breeding groups in the industry is strengthened. the speed of capacity removal is low before and after high.

2. Review and follow-up prospect of capacity elimination in this round.

1) there has been a process of de-production: from January to July 2023, the industry experienced seven consecutive months of deep losses (the maximum loss in the historical cycle was seven months), but the rate of reproduction and elimination did not accelerate significantly. There are two reasons: first of all, the proportion of retail investors in the industry is relatively low. In the early stage of de-chemical, because the financial strength of the group market and large-scale market is relatively good, even if some retail investors withdraw voluntarily, the extent of the industry as a whole is not obvious; secondly, piglets make a certain profit in the first half of the year. The loss of self-breeding led to the active capacity elimination of some breeding groups in the industry, but under the condition that the industry piglets could still achieve a certain profit, the export piglets were not willing to do so and even were still making up the fenced sows.

2) follow-up outlook: on the one hand, when there is no gap in supply, pig prices may remain low in the later period, and the profitability of commercial pigs may continue to deteriorate. At the same time, when the demand for piglets enters the seasonal off-season, piglets lose money or continue to enlarge, accelerating the continuous loss of cash flow in the industry, and the process of removal is expected to be accelerated.

3. Investment suggestions

1) the industry has lost money for a long time-the range of loss is large, the financial pressure has appeared, the average price of live pigs is weak and the price of piglets has dropped from the previous profit state to a loss of 100 yuan per head +, the financial pressure of the industry has increased, and de-industrialization is expected to accelerate marginally! The gold buying period of the pig sector is [pig price short and long] + [capacity elimination trend has become] + [plate valuation is low], at the same time [forward-looking odds > accurate timing odds]. Under the condition that the industry has experienced long-term losses in the early stage, the process of capacity removal in the industry may continue and attach importance to "forward-looking" opportunities.

2) [plate valuations are low]. From the average market value of 2023, including superstar farming and animal husbandry, Jin Xinnong and Shennong Group 3000 + yuan per head; Muyuan shares, Wen's shares, Huatong shares, New Wufeng 2000-3000 yuan per head; Tang Renshen, Jingji Zhinong, Aonong Biology, Tianbang Food 1000-2000 yuan per head; valuation is in the historical relative bottom range, the market capitalization of many stocks may still have significant room to rise (data as of October 22).

In the current stage, [plate β configuration, preferred flexibility], Big Pig is the first [Wen's shares] (300498.SZ), followed by [Muyuan shares] (002714.SZ); piglets are suggested to focus on: [Huatong shares] (002840.SZ), followed by [Aonong Biology] (603363.SH) and so on.

Risk Tips:

1, national policy change risk; 2, breeding epidemic disease risk; 3, price fluctuation risk; 4, market systemic risk; 5, third-party data accuracy risk; 6, related data failure risk.