Finance Association, November 4 (Reporters Liu Jian and Wang Ping An) Since this year, as the market picked up, A-share listed pig companies have taken advantage of “dividends,” and the total profit for the first three quarters has exceeded 23 billion yuan. CIFA reporters learned in multiple interviews that in addition to the rise in pig prices, the sharp drop in costs is another important driving force for the flourishing performance of listed pig companies.

According to statistics from a financial news agency reporter, out of 12 listed pig companies with public cost information on A-shares, the cost of 11 pig companies has dropped to the 14 yuan per kilogram range without considering the differentiation of cost statistics. Of these, the cost of 5 companies has been reduced to the 13 yuan per kilogram range.

With significant cost reduction results, a number of listed pig companies have already achieved their cost targets within the year, and indicated that there is still room for cost reduction in the fourth quarter and next year. ST Tianbang (002124.SZ) related sources said, “We expect the complete cost of fattening next year will be reduced to less than 14 yuan/kg. In the future, after normal production at full capacity, the full cost can be reduced to less than 12 yuan/kg.”

Furthermore, pig companies are beginning to hit the 12 yuan cost range. Shennong Group said, “The company's breeding business cost control target in 2025 is: the complete cost is less than 13 yuan/kg.” Some analysts think, “The recovery in pig prices is only a short-term benefit; cost control is a moat for the long-term development of pig companies. Although pig prices have declined somewhat recently, with the support of the cost reduction results of listed pig companies this year, the profits of relevant pig companies may still be guaranteed next year.”

Ninety percent of pig companies' costs are in the 14 yuan range. Who is the king to cut costs?

A Financial Services Association reporter combed through public information and found that without taking into account the differences in statistical methods, the latest cost of 11 A-share listed pig companies has dropped below 15 yuan/kg, accounting for nearly 90%. Among them, Shennong Group (605296.SH), Muyuan Co., Ltd. (002714.SZ), Wen's Co., Ltd. (300498.SZ), Tiankang Biotech (002100.SZ), and Superstar Agriculture and Animal Husbandry (603477.SZ) have even dropped below 14 yuan/kg.

(Listed pig companies' cost schedule, Financial Services Association reporter system)

Among them, Shennong Group's full cost in September was 13.4 yuan/kg, which is currently the lowest cost of listed pig companies and won the “King of Cost Reduction” crown; followed by Muyuan Co., Ltd. at 13.7 yuan/kg and Wen's at 13.8 yuan/kg, and Tiankang Biotech, respectively.

Judging from the decline, nine pig companies' costs have dropped by more than 1 yuan/kg during the year. Among them, Lihua Shares (300761.SZ) dropped the most by 3 yuan/kg during the year; followed by Muyuan Co., Ltd., Wen's Co., Ltd., and Tiankang Biotech, all of which have dropped by more than 2 yuan/kg during the year.

A CIFA reporter noticed that the decline in the cost of feed ingredients is an important factor in the cost reduction for pig companies this year. Choice data monitoring shows that up to now, the average price of soybean meal and corn is 3,074 yuan/ton and 2,155 yuan/ton respectively, which decreased by 1,000 yuan/ton and 333 yuan/ton respectively during the year. Some industry analysts said, “This year, the prices of corn and soybean meal, both showed a downward trend and hit new lows in recent years, becoming an important fulcrum for pig companies to reduce costs.”

The improvement in production performance and the decline in costs during the period have become another important factor in the cost reduction of pig companies. Muyuan Co., Ltd. recently stated that since this year, the total cost of the company's pig farming has continued to drop. It has dropped slightly below 13.7 yuan/kg in September, down more than 2 yuan/kg from 15.8 yuan/kg at the beginning of the year. Among them, the drop in feed prices contributed about 50%, and the improvement in production performance and the decline in cost amortization during the period contributed about 50%.

A relevant person from ST Tianbang said in an interview with a reporter from the Financial Federation, “The company's cost reduction this year is due on the one hand to a drop in the price of feed ingredients, and on the other hand, it is mainly due to improved production efficiency and cost savings.”

It is worth mentioning that judging from the completion of cost targets during the year, six listed pig companies, including Wen's Co., Ltd., Shennong Group, Tiankang Biotech, Lihua Co., Ltd., ST Tianbang, and Jin Xinnong (002548.SZ), have achieved their goals for the year, while the rest of the pig companies are expected to achieve their targets in the fourth quarter. Some analysts believe, “On the basis of the reduction in feed prices in the first three quarters, the relevant companies achieved significant cost reduction results. It is expected that there will still be corresponding room in the fourth quarter, and the relevant pig companies may have achieved their cost targets during the year.”

However, some analysts pointed out, “Relevant pig companies also need to prevent the cost impact of rising feed raw material prices, and can make more efforts to reduce costs in terms of improving production performance.”

A number of pig companies said there is still room to cut costs, and profits may still be guaranteed next year

On the premise that cost reduction in the first three quarters has achieved good results, a number of listed pig companies said that there is still room for reduction in breeding costs within this year and next.

A relevant person from Wen's Co., Ltd. said, “In July, the company's comprehensive pork breeding cost was 6.9-7 yuan/kg, and it is expected that there will still be room for decline in the fourth quarter.”

A person related to New Hope (000876.SZ) revealed during the third quarter results conference call, “Looking at the fourth quarter, there is still room for the company's costs to drop by a few cents. It is likely that the cost of our fat pig operating line will drop below 14 yuan/kg in December.”

A relevant person from ST Tianbang said in an interview with a reporter from the Financial Federation, “Full cost = pig fry cost+weight gain cost+cost sharing. The company still has room to reduce costs in these areas. Especially after improving cash flow and capacity utilization through restructuring, we expect the full cost of fattening to drop below 14 yuan next year, and the full cost can be reduced to less than 12 yuan after normal production at full load in the future.”

Dongrui Co., Ltd. (001201.SZ) recently stated that the company's full cost in September was 16.4 yuan/kg, and next year's full cost target is less than 15 yuan/kg.

It is worth noting that pig companies at the forefront of cost control are already planning to hit the 12 yuan cost range next year. Shennong Group recently revealed, “The company's breeding business cost control target in 2025 is: the complete cost is less than 13 yuan/kg.”

Cost reduction and efficiency are expected to be an important guarantee for listed pig companies to profit next year, and a moat to withstand the sluggish cycle in the future. Some analysts believe, “According to data on breeding sows, the supply of pigs in 2025 is expected to be between 2023 and 2024, so the price may be higher than 2023 and lower than 2024. Combined with cost reduction and efficiency, it is expected that the breeding side will still be profitable next year. Furthermore, the recovery in pig prices is only a short-term benefit; cost control is a moat for the long-term development of pig companies. Companies that are leading in cost reduction are expected to maintain stable profits through efficient cost control during the period when pig prices are sluggish.”

The aforementioned ST Tianbang related person also said, “Currently, the pig breeding industry is becoming more large-scale. Future industry competition will be a cost competition. The company's profit margin depends on market pig prices and breeding costs. As the company continues to clear and integrate surplus production capacity, increase the full load rate of superior production capacity, and advance cost reduction and efficiency measures such as improving the level of biosafety management, the profit margin is expected to be further broadened, and the ability to withstand cyclical risks will also be further strengthened.”