The Zhitong Finance App learned that China Post Securities released a research report saying that pig prices in the fourth quarter were still strong and profits were worry-free. At the same time, the three quarterly reports of listed companies are worth looking forward to. After early adjustments, sector valuations are low and allocation values are prominent. At the right time for the industry cycle to reverse, it is recommended to choose targets with outstanding cost advantages and then balance growth. 1) Leading companies have high certainty and relatively obvious cost advantages. Recommended attention: Makiyuan Co., Ltd. (002714.SZ), etc. 2) Small and medium-sized enterprises are growing faster, and there is more room for cost reduction. Recommended attention: Superstar Agriculture and Animal Husbandry (603477.SH), etc.

The main views of China Post Securities are as follows:

Summary of the August release situation: prices have risen sharply, and production capacity growth has slowed

In August, pig prices continued to rise, and listed companies followed the trend: a slight increase in volume and a slight decrease in weight.

1) Volume: Continue to increase slightly. Seventeen listed pig companies released a total of 12.925 million pigs, a slight increase of 0.9% over July and a year-on-year increase of 1.6%; a total of 0.1 billion pigs were released in January-August, with a cumulative increase of 2.2% over the previous year. In August, pig prices continued to rise. The breeding side followed the trend, and the number of sales increased month-on-month. Looking at the first eight months as a whole, the pace of release was steady. High pig prices did not stimulate the industry to speed up listing and increase production capacity on a large scale.

2) Price: High upward trend. In August, the average price of pigs nationwide was 20.37 yuan/kg, up 7.56% from the previous month. The listing prices of the 14 listed companies also increased significantly. The average price in August was 20.20 yuan/kg, up 6.69% from month to month and 19.54% year on year. Pig prices continued to rise at a high level in early August, and peaked and began to fall back in the mid to late stages. Overall supply remained tight in August. Combined with a small amount of secondary breeding, the price of pigs was boosted.

3) Weight: Slight loss. The average weight of the 10 listed companies listed was 116.1 kg/head, a decrease of 0.46% over the previous month. Since May, all listed companies have shown a slight downward trend month by month, which contrasts with the gradual rise in pig prices, reflecting the cautious expectations of the industry, and mainly adopting a strategy to follow the trend.

There is limited room for pig prices to fall, and the industry's profit cycle may exceed expectations

Pig prices peaked and fell as expected in August, but there is limited room for a subsequent decline. At the same time, there is no need to be too pessimistic about 25 years; the industry's profit cycle may exceed expectations. After the first quarter of '24, third-party production capacity data took the lead in changing from decline to increase, corresponding to subsequent supply or slow increases, but the increase was not obvious. Moreover, even though pig prices have clearly rebounded since April, the Ministry of Agriculture and Rural Affairs has only slightly increased for 3 months. In August, pig prices surpassed expectations, and the industry made huge profits, but production capacity did not increase but fell, reflecting the industry's current cautious expectations and financial constraints. Looking back, the fourth quarter is a period of high incidence of diseases, making it more difficult to increase production capacity. Next year supply growth may not be obvious. Pig prices are expected to remain relatively high, and the duration of this industry's profit cycle will exceed expectations.

Risk warning:

Risk of animal disease occurrence and risk of fluctuating raw material prices.