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China pork stock expectations on the rise, analysts say, and past success gives investors reason to expect continued growth

  • Muyuan Foodstuff, other big pig breeders trade at discounts to ever-rising price targets
  • African swine fever, US meat supply turmoil strain pork supply, boosting Chinese breeders’ fortunes

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Pigs are seen on the farm of pig farmer Han Yi at a village in Changtu county, Liaoning province, China, on January 17, 2019. Photo: Reuters
Zhang Shidong

Investors in Chinese top pork stock are used to them bringing home the bacon in terms of high returns. That record is expected to continue, analysts say, as supply stays strained between persistent African swine fever and turmoil in the US meat supply chain due to the coronavirus.

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Muyuan Foodstuff and New Hope Liuhe have had their price targets lifted by at least four fold since 2019, only to see their stock prices follow the heels of these upbeat recommendations. Now, analysts have again raised the share-price estimates to levels above where the stocks trade currently, meaning they expect the upside on the already high-flying sector will carry on.

Pig-farming stocks are one of the few bets that can shield investors from tumult at a time when Covid-19 is pushing the global economy toward the worst recession since the Great Depression and has rattled financial markets from stocks to crude oil futures. A gauge of mainland-traded companies that are engaged in pig breeding has risen 23 per cent so far this year, extending a gain of 69 per cent in 2019. In comparison, the benchmark Shanghai Composite Index has fallen 5.1 per cent in 2020.

“We expect pork prices to stay at a high level throughout the year and the industry’s leading players will benefit most from it,” said Sheng Xia, an analyst at Citic Securities. “The leaders are obviously undervalued so we continue to recommend the pig-farming sector.”

Shares of Muyuan, the nation’s biggest listed pig breeder based in the central Henan province, last traded at 123.30 yuan in Shenzhen. The stock has an average 12-month price target of 143.06 yuan, according to data on the estimate by analysts that is compiled by Bloomberg.

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