Shennong Group(605296) 华泰证券·2025-01-24 01:00Investment Rating - The report maintains a "Buy" rating for the company [7][4]. Core Views - The company is expected to achieve a net profit attributable to shareholders of RMB 6.1 to 7.5 billion in 2024, with a midpoint of RMB 6.8 billion, indicating a turnaround from losses in the previous year [1][4]. - The company has demonstrated cost leadership and rapid growth in livestock output, making it a rare investment opportunity with both growth potential and financial stability in the current pig cycle [1][4]. - The report anticipates a significant increase in the number of pigs slaughtered, estimating 2.27 million heads in 2024, a 49% year-on-year increase, with an average profit of approximately RMB 280 per head [2][4]. Summary by Sections Financial Performance - The company is projected to achieve a revenue of RMB 5.378 billion in 2024, a 38.21% increase from the previous year [6]. - The estimated average selling price of pigs is expected to rise to RMB 16.3 per kilogram in 2024, up 13% from RMB 14.4 per kilogram in 2023 [2][4]. - The total cost of production is estimated to decrease to RMB 14.0 per kilogram in 2024, down from RMB 16.1 per kilogram in 2023 [2][4]. Future Outlook - The company aims to reduce its total production cost to below RMB 13 per kilogram by 2025, leveraging improvements in pig health, economies of scale, and management efficiency [3][4]. - The projected output for 2025 and 2026 is set at 3.5 million and 4.5 million heads respectively, representing year-on-year growth of 54% and 29% [3][4]. - The report has adjusted the profit forecast for 2024 to RMB 6.8 billion, and for 2025 and 2026 to RMB 5.2 billion and RMB 4.6 billion respectively, reflecting a downward revision due to anticipated lower pig prices [4][12]. Valuation - The target price for the company is set at RMB 35.00, based on a price-to-book ratio of 3.5 times for 2025 [4][8]. - The report notes that the company's financial stability and growth prospects justify a higher valuation compared to peers, which have an average price-to-book ratio of 2.0 times for 2025 [4][13].