Farming Group Potentially Turning Around
发布时间:2026-09-27 来源:华泰证券
We initiate Zhengbang Technology at BUY with a target price of RMB3.85, based on a 2027 market cap per hog of RMB3,100, equivalent to a 2027 PE of 24x. Zhengbang Technology is an agricultural and animal husbandry enterprise with dual main businesses of hog farming and feed. After completing restructuring at end-2023, it is gradually achieving a turnaround. The core restructuring party, Twins Group, is a hog enterprise with leading competitiveness in the industry. With its all-round support, the company had overfulfilled the two-year operational improvement targets under its restructuring plan by end-2025. As hog prices enter a bottoming-out and recovery phase, we expect the company to further optimize costs in 2027-2028 and turn profitable in 2027. In addition, Twins Group started preliminary preparations for asset injection at end-2025. If it completes the asset injection as scheduled at end-2027, we expect the company to rapidly become a farming group with leading operating quality.
Hog sector destocking is accelerating, time to position
1) In the short term, hog prices recovered in early July from the bottom plateau of RMB9.6/kg in June to RMB10.9/kg on 8 September, but we think that after this small rebound in hog prices, the industry has not yet emerged from a state of cash flow depletion, and we still expect continued production capacity reductions in 2H. 2) In the medium to long term, 2Q26 may be the price trough, given that this quarter recorded the most pronounced supply-demand imbalance during the current cycle. As YoY pressure on the theoretical slaughter volume corresponding to piglets continues to ease, and as 4Q peak-season demand provides impetus, the supply-demand relationship is set to see a marginal improvement, and the trend of hog prices bottoming out and moving upward may already be relatively clear. 3) In terms of catalysts, as hog prices tested the bottom in 2Q26, industry production capacity reduction accelerated. Currently, livestock farming sector valuations remain at the bottom range, and in 1H26 several leading livestock farming enterprises initiated shareholding increases and buyback plans; the hog farming sector may be approaching an allocation window.
Earnings forecasts and valuation
We forecast the company’s net profit attributable to the parent company for 2026/2027/2028 at RMB-1.29bn/1.49bn/1.25bn, with EPS of RMB-0.14/0.16/0.13. We think that the company is gradually achieving a turnaround from adversity, with further room for operational optimization. During the accelerated phase of industry capacity reduction in 4Q23, the midpoint market capitalizations per head for Muyuan Foods and Wens Foodstuff Group were RMB3,239/3,574. Taking into account the company’s current growth profile and cost-side discount, we assume 11.5mn heads of slaughter volume for the company in 2027 and a market capitalization per head of RMB3,100, for our target price of RMB3.85.
Risks: lower hog prices than we expect; lower company hog slaughter volume than we expect; raw-material price fluctuations; less asset injections or follow-up support than we expect; company asset losses from natural disasters such as floods in Guangxi.