Under weak demand and weak expectations, Shenzhen Securities Research believes that the supply-side 'expectation gap' is the core reason why pig prices have performed better than the industry and market mainstream expectations.
Intelligent Finance News APP learned that Shenzhen Securities Research issued a research report stating that to grasp the profitability of livestock and poultry breeding, the industry should pay attention to seed industry reforms at the bottom. After pig prices hit a new high and fell slightly, they are still in a cyclical rise channel. The certainty of breeding costs has fallen back, and it is expected that the Q3 corporate performance will still maintain high growth compared with the same period last year. It is recommended to focus on leading pig breeding enterprises; the supply-side pressure of broiler breeding is easing, and the marginal rebound of demand is expected to boost chicken prices and improve profits. The five departments jointly issued a notice to deepen seed industry revitalization and agricultural technology financial services, support qualified seed enterprises to go public, list financing and refinancing, and recommend focusing on leading seed companies.
This week, the Shenzhen Securities Agricultural, Forestry, Animal Husbandry and Fishery Index fell by 2.0%, while the CSI 300 Index rose by 0.4%. The top five gainers in stocks are: Wanchen Group (27.4%), Honghui Fruit and Vegetable (5.9%), SDIC Zhonglu Fruit Juice (5.9%), Shanghai Hile Biotechnology (5.3%), and Shanghai Xuerong Biotechnology (4.8%); The top five decliners are: Bangji Technology (-11.1%), Hui Long Shares (-10.2%), Yunnan Jinggu Forestry (ST) (-8.7%), ST Tianshan (-8.6%), Shennong Group (-8.6%). Investment analysis opinion: grasp the profitability of pig breeding and focus on seed industry reform at the bottom. The price of pigs is still in a cyclical rise channel. The certainty of breeding costs has fallen back. Shenzhen Securities Research expects that the corporate performance in the third quarter will still maintain high growth compared with the same period last year. It is recommended to focus on leading pig breeding enterprises; the five departments jointly issued a notice to deepen seed industry revitalization and agricultural technology financial services, support qualified seed enterprises to go public, list financing and refinancing, and recommend focusing on leading seed companies. Key listed companies: breeding chain: Wens Foodstuff Group, Muyuan Foods, Lihua Animal Husbandry; planting chain: Yuan Longping High-Tech Agriculture, Shandong Denghai Seeds, Beijing Dabeinong Technology Group; pet food: Guai Bao Pet, Yantai China Pet Foods, PetPal Pet Nutrition Technology.
Pig breeding: After pig prices hit a new high and fell slightly, pay attention to the degree and sustainability of the industry's cyclical prosperity. According to Yongyi Consulting, on August 18th, the average selling price of foreign three-yuan live pigs nationwide was 20.49 yuan/kg, a slight week-on-week decrease of 3.26%; under the reality of tight supply, pig prices will continue to rise to a new high for the year at the beginning of next week. The pace of secondary feeding and some scattered households will increase, but the weak demand in the off-season still causes the pig price to fall. The weight gain of pigs has also recovered somewhat after the weakening effect of high temperature: the average weight of slaughter this week continued to increase slightly to 126.17 kg/head, a week-on-week increase of +0.34 kg; the number of secondary feeding entities entering the market has decreased. Terminal frozen products are decreasing. The inventory supply pressure of pig prices in the peak season may also decrease in the future: the national frozen product storage capacity rate has dropped to a new low of 16.38% of the year (Yongyi Consulting) this week.
Investment analysis opinion: grasp the strong period of pig prices and focus on the performance realization certainty of leading pig enterprises. Under weak demand and weak expectations, Shenzhen Securities Research believes that the supply-side 'expectation gap' is the core reason why pig prices have performed better than the industry and market mainstream expectations. From the perspective of production capacity, the industry main body is cautious in expectations, and the behavior of breeding and resumption of production is relatively conservative. The future increase in supply is expected to be relatively slow. This round of pig breeding profit cycle is expected to be lengthened. The decline in feed raw material prices and the improvement of breeding efficiency will still drive some high-quality pig companies to 'reduce costs and increase efficiency', and the degree of performance realization is worth looking forward to. It is recommended to focus on Wens Foodstuff Group, Muyuan Foods, etc.
Broiler breeding: The rebound in chick prices is slowing down, and the price of live birds is maintaining a trend of rising; the price of chicken meat is low under weak demand. The commodity representative chicken seed price of white feather broilers this week is 3.55 yuan/bird, which is flat compared to the previous week. The enthusiasm of downstream centralized replenishment has slowed down, and the seasonal rebound of chick prices may come to an end. The average price of white-feather broiler main producing areas this week is 7.77 yuan/kg, a week-on-week increase of +0.26%. The current three dog days are over, and the market's chicken sources are relatively scarce. The supply side continues to support prices. The comprehensive sales average price of chicken meat divided into parts this week was 9.44 yuan/kg, a week-on-week decrease of -1.15%.
Investment analysis opinion: supply-side pressure is easing, and marginal recovery in demand is expected to boost chicken prices, bullish on the improvement of breeding profitability in the second half of the year. Recommend to pay attention to Fujian Sunner Development, etc.
Seed industry: pay attention to the revitalization policy of the seed industry, mergers and acquisitions or catalyzing the acceleration of the concentration of the seed industry. Five departments jointly issued the "Notice on Strengthening Financial Support for the Special Action of Rural Revitalization", proposing to deepen the revitalization of the seed industry and agricultural technology financial services, support qualified seed industry enterprises to go public, list financing and refinancing and carry out investment mergers and acquisitions and restructuring to help improve independent innovation capabilities.
Investment analysis opinion: pay attention to the progress of industry consolidation, and the market share of leading companies is expected to continue to increase. In the medium and long term, whether it is financing for enterprises with independent innovation capabilities and mergers and acquisitions, or the promotion of commercialization of transgenic, it is expected to change the competitive pattern of China's seed industry of "big and fragmented" and drive the upward concentration of the industry. Recommend to pay attention to leading seed companies, focusing on listed companies: Yuan Longping Hi-Tech Agriculture, Shandong Denghai Seeds, Beijing Dabeinong Technology Group, etc.
Risk reminder: continuous low prices of live pigs and broilers; delay in the promotion process of transgenic corn; and outbreak of breeding diseases.
