One of China’s biggest pig breeders is now top of the pile of stocks on the MSCI Asia Pacific Index for this year, as African swine fever continues to disrupt business in the world’s top pork-consuming nation.
Muyuan Foodstuff Co (牧原食品) yesterday morning rose 7 percent in Shenzhen, China, trading at a record high after advancing by the 10 percent daily limit on Monday.
That has taken its rally this year to 88 percent, compared with an 8.6 percent gain by the MSCI gauge.
The ascent is even more impressive over six months: Muyuan has soared 146 percent, again the best performer on the index, which was down 1.3 percent in that time.
The surge has been driven by expectations for higher pork prices as African swine fever reduces pig supply.
China International Capital Corp (CICC, 中金公司) said that Muyuan should continue benefiting from the outlook on prices, which it sees at a cyclical bottom and potentially in line for a bounce in the second quarter.
Support is also coming from Beijing, including the government pledging to support share listing and fundraising by qualified agriculture firms, according to official guidelines.
Muyuan’s gains this week might have been helped by its plan for a pig slaughtering and food processing project in Zhengyang County, as it should limit the negative impact from government restrictions on transportation of live hogs.
“Muyuan’s production capacity is concentrated in Henan Province, where pig prices have been lower than the national average due to restrictions on pig transport,” a CICC note dated on Monday said.
The extra 2 million-hog slaughtering capacity should help accelerate the company’s sales and raise average selling prices, it said, raising its price target on the stock by 43 percent to 60 yuan.
Expectations of higher prices have helped offset disappointing results from last year, when Muyuan’s net profit slid 78 percent, according to a filing on Friday last week.
The company is not alone in seeing strong share-price gains on the back of the African swine fever outbreak. The Shenzhen Composite’s agriculture index has outperformed the benchmark’s other sub-gauges with a 48 percent jump this year. Wens Foodstuffs Group Co Ltd (溫氏食品集團) is up 46 percent.
CICC is also positive on Muyuan’s longer-term prospects, saying that the company’s expansion into slaughtering would help it adapt to the likely trend of pork consumption in China shifting from predominantly fresh meat to chilled meat, which should also help prevent and control epidemics.
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