Muyuan Foods: Earnings Suppressed by Subdued Hog Prices; Fair Value Estimate Down 4% to CNY 46

No-moat Muyuan Foods announced a preliminary 2023 net loss of between CNY 3.7 billion and CNY 4.5 billion, versus our projected net income of CNY 1.2 billion. The disappointment was mainly driven by suppressed hog prices during the fourth quarter of 2023 and an impairment of biological assets. Hog production volume of 63.8 million in 2023 was also below our estimate of 65.5 million. After incorporating the latest data, we cut our 2024 hog production volume growth forecast to 7%, from 11%. We also lowered our first-quarter 2024 selling price assumption as hog prices in January 2024 were below our expectations. We maintain our view that hog prices would only rebound from the second half of 2024 onward, but we now forecast a more moderate pace of price recovery in the third quarter of 2024. Overall, we anticipate hog prices to grow 9% year on year in 2024, versus our previous forecast of 12%. As a result, our 2024 net income estimate falls 33% to CNY 11.1 billion.