Muyuan: Higher Hog Prices Offset Softer-Than-Expected Sales Volume; Fair Value Intact

We reviewed our assumptions for no-moat Muyuan Foods’ 2024 earnings projections ahead of the release of its second-quarter results. Although sales volume in the second quarter was lower than expected, selling price was higher than estimated, driving hog production revenue to be roughly in line with our estimate. After fine-tuning our assumptions, we keep our earnings estimates unchanged. The company also resumed profit for the first half this year, with an estimated net profit range of CNY 900 million-CNY 1.1 billion, versus net loss of CNY 2.79 billion in first-half 2023. We expect the majority of 2024 earnings to be backloaded to the second half, similar to 2022, as hog prices continue to improve and drive margin expansion over the year.