Recently, among a group of pig enterprises, Wens Foodstuff Group took the lead in releasing its financial report for the third quarter of 2024, finally gaining an advantage.

After all, peers such as Muyuan Foodstuff, ST Tianbang, and DBN Technology have released their third-quarter performance forecasts, successfully turning losses into profits year-on-year, which led the market to have expectations of "laggards" for companies that couldn't release forecasts.

The Best Third Quarter Since Listing

In the first three quarters, the company achieved a total operating revenue of 75.42 billion yuan, a year-on-year increase of 16.56%; it achieved a net profit of 6.636 billion yuan, a year-on-year increase of 244.58%; and the net profit attributable to the parent company was 6.408 billion yuan, a year-on-year increase of 241.47%.

Looking at it quarter by quarter, in the first quarter of this year, the company achieved a revenue of 21.85 billion yuan and a net loss of 1.257 billion yuan; in the second quarter, it achieved a revenue of 24.91 billion yuan and a net profit of 2.685 billion yuan; in the third quarter, it achieved a revenue of 28.66 billion yuan and a net profit of 5.207 billion yuan.

This means that Wens Foodstuff Group incurred a loss in the first quarter, turned losses into profits in the second quarter, and saw a surge in profits in the third quarter.

Moreover, looking at the vertical comparison, the performance of the single quarter in the third quarter of this year is the best among all the third quarters in the history of Wens Foodstuff Group.

The previous peak of Wens Foodstuff Group's third-quarter performance was in 2019, when the operating revenue was 17.87 billion yuan, and the net profit was 4.889 billion yuan. The reason was naturally the catalytic effect of the African swine fever epidemic.

Even this performance is the second-best single-quarter performance in the history of Wens Foodstuff Group. The best single-quarter performance was in the fourth quarter of 2019, when the operating revenue was 24.84 billion yuan, and the net profit was 8.113 billion yuan.The sustained positive market trend has effectively reduced the financial burden on Wens Foodstuff Group Co., Ltd. As of the end of the third quarter, the company's debt-to-asset ratio has decreased to 54.86%, a drop of 6.55% compared to the end of the previous year.

The excellent performance has also made Wens Foodstuff Group, which has money in hand, more generous.

Wens Foodstuff Group stated that in order to better reward shareholders, it has released a preliminary profit distribution plan for the first three quarters of 2024, proposing to distribute a cash dividend of 1.5 yuan (including tax) per 10 shares to all shareholders, totaling a cash dividend of 995 million yuan.

Wens Foodstuff Group indicated that this preliminary profit distribution plan is in line with the company's performance growth. The board of directors is full of confidence in the company's prospects and future development. At the same time, this move is also conducive to all shareholders sharing the company's operating results and safeguarding the long-term interests of shareholders.

This profit distribution is the second cash dividend of Wens Foodstuff Group this year and the 13th cash dividend since its listing at the end of 2015. Including this cash dividend, the total cash dividend to shareholders will reach 26.796 billion yuan.

Market improvement, continuous benefits

As mentioned earlier, many listed pig enterprises are "eager" to disclose their third-quarter performance forecasts. Many leading pig enterprises are expected to turn losses into profits in the first three quarters. Behind the profits, the main reasons are the rise in pig prices and the decrease in pig farming costs.

In the performance forecasts of listed pig enterprises, many companies such as Muyuan Foodstuff Co., Ltd., ST Tianbang, and Dabeinong are expected to turn losses into profits in their operating performance for the first three quarters of this year compared to the same period last year.

Muyuan Foodstuff Co., Ltd. estimates that the net profit attributable to the shareholders of the listed company for the first three quarters of this year will reach 10 billion to 11 billion yuan; ST Tianbang estimates that the net profit attributable to the shareholders of the listed company will be about 1.301 billion to 1.351 billion yuan; Dabeinong estimates that the net profit attributable to the shareholders of the listed company will be 120 million to 160 million yuan.

In addition, there are listed pig enterprises such as Tiankang Biological and Tangrenshen, whose pig sales volume and sales revenue in the first three quarters of this year have both increased year-on-year.In terms of sales volume, in September, Muyuan Foods, Wens Foodstuffs, and New Hope were ranked in the top three; regarding the average sales price, it was generally above 18 yuan per kilogram.

In September of this year, Muyuan Foods sold 5.358 million pigs, with sales revenue of 11.899 billion yuan.

The sales volume of pigs in September increased for companies such as Wens Foodstuffs, Zhengbang Technology, and Shennong Group.

Wens Foodstuffs sold 2.5105 million pigs that month, a month-on-month increase of 6.65%, and a year-on-year increase of 10.84%; Zhengbang Technology sold 380,800 pigs, a month-on-month increase of 37.48%, and a year-on-year increase of 14.35%; Shennong Group sold 199,100 pigs, a month-on-month increase of 14.62%, and a year-on-year increase of 21.63%.

Dabulon sold 544,200 pigs in September, a month-on-month increase of about 30%, and a year-on-year increase of about 9%, with total sales revenue of 1.201 billion yuan for the company that month.

Clearly, pig enterprises that have been sluggish for two years have cashed in on the good news in this cycle and ushered in the dawn.

Pig price outlook, "fat today, thin tomorrow"?

Now, what investors care about the most is, first, whether pig enterprises can have a perfect finish in the fourth quarter, and second, how the pig market will perform next year.

Since mid-August, the national pig price has fluctuated and fallen.According to data from SooZhu.com, on October 23rd, the national average price for lean pigs sold was 17.68 yuan per kilogram, a slight increase of 1.43% compared to the previous day.

On October 19th, pig prices reached their lowest point since June, with the national average price for lean pigs sold at 17.32 yuan per kilogram.

From this perspective, the current pig prices are quite tense.

Taking the National Day as an example, the average price of pork sold during the National Day holiday followed a V-shaped pattern. From October 1st to 4th, there was a roller coaster-like decline, and from the 5th to 7th, there was a certain rebound.

Many slaughtering enterprises ended their purchasing actions for the National Day holiday stock early. It can be seen that the market unanimously expects pig prices to fall.

After the holiday, pig prices rebounded briefly and then fell. Behind this is the large number of breeders selling pigs for the second time. Although it is also the second time selling pigs, there are actually two completely different attitudes. Some breeders aim to recoup cash, so they choose to "sell high" during the fluctuation period and do not gamble on the market; large pig farms are "cautiously optimistic" about pig prices, so they generally ignore fluctuations and "sell with the trend".

Although they are all selling, pig companies also resist low prices and have the intention to reduce volume and increase prices.

The market has different views on whether pig prices can be maintained in the fourth quarter.

On the one hand, from the perspective of futures prices, on October 23rd, the pig futures 2411 remained at around 17 yuan per kilogram, while the pig futures 2501 contract price fell to around 15.3 yuan per kilogram.

That is, futures investors vote with money and believe that pig prices will continue to fall.According to the National Bureau of Statistics, the number of breeding sows in September was 40.62 million, a decrease of 1.78 million compared to the same period last year, down by 4.2%; an increase of 250,000 compared to the previous month, up by 0.6%. The basic production capacity continued to adjust slightly upwards, rising again after a slight decline last month.

However, on the other hand, the current inventory data has reasons to make observers more optimistic.

The latest data from the National Bureau of Statistics shows: At the end of the third quarter, the national pig inventory was 426.94 million heads, a year-on-year decrease of 3.5%; in the first three quarters, the national pig outflow was 520.30 million heads, down by 3.2%.

At the end of the third quarter in 2024, the national pig inventory was 426.94 million heads; at the end of the third quarter in 2023, the national pig inventory was 442.29 million heads; at the end of the third quarter in 2022, the national pig inventory was 443.94 million heads; at the end of the third quarter in 2021, the national pig inventory was 437.64 million heads.

It can be seen that the pig inventory in the third quarter of 2024 is the lowest in the past four years compared to the same period.

In conclusion, many pig enterprises are somewhat in a dilemma now.

From the perspective of the cost line, Wens Foodstuffs Group Co., Ltd. revealed that "the company's pig farming cost continues to decline. The comprehensive cost of pig farming in August has been reduced to below 6.9 yuan per jin. This year, the company's annual average comprehensive cost of pig farming is striving for a target of 7.1 yuan to 7.4 yuan per jin."

On October 14, Muyuan Foodstuff Co., Ltd. responded to investors, stating that the company's complete cost of pig farming in September 2024 was slightly lower than 13.7 yuan/kg.Taking into account the gradually decreasing breeding costs, there is still room for pig prices to fall. However, a decline in pig prices will erode operating profits.

China's annual pig output is roughly around 700 million heads, and Muyuan accounts for only 1/10 of that. Even the combined output of listed companies is less than 25%; the largest proportion of pig farming is still in the hands of individual farmers.

Speaking of individual farmers, they are no longer small-scale breeders.

The scale of pig farming in China has increased from about 7.7% in 2000 to 68% in 2023, a nearly ninefold increase in 20 years. In China, large-scale pig farming is defined as an annual output of 500 heads or more.

Such farmers can be considered "moderately well-off." To achieve market clearance, it's necessary to "compete with one's financial resources."

Therefore, barring any unexpected events, under the current supply and demand conditions, there is little hope for pig prices to rise significantly; the main issue is whether they will stabilize or continue to fall.

This game among pig farmers is worth continued attention...