Muyuan Foods: Keeping Costs Low Is Key for One of China’s Largest Hog and Pork Producers

We initiate Muyuan Foods with a no-moat rating and a fair value estimate of CNY 48 per share, which implies 15 times 2024 price/earnings, 9 times EV/EBITDA, and 3.7% free cash flow yield. The company is one of China’s largest hog and pork producers. Muyuan’s share price has fallen 15.5% year to date, which we believe reflects weak hog prices on excess supply. However, we think hog prices have bottomed in the first half of 2023 and should stabilize for the rest of the year. We think the market is too pessimistic on Muyuan and see the shares as undervalued, but investors will need to sit through a tough 2023 full-year profit performance.