Chinese Chicken Farmer Expects 2,700% Profit Leap

(Bloomberg) -- A poultry company from eastern China said its profit will soar as much as 2,693% thanks to higher prices of white-feathered chickens.

Shandong Yisheng Livestock and Poultry Breeding Co. expects to report first-half net income of 900 million to 905 million yuan ($131 million), compared with just 32 million yuan in the same period last year, according to a filing to the Shenzhen stock exchange. The profit guidance followed “significant price hikes” on white-feathered broilers due to tight supply. Broilers are chickens raised for meat production.

Yisheng’s shares rose as much as 7.5% Tuesday before paring the gains and closing little changed. They’ve now advanced 200% this year.

“The way a company’s earnings can go up more than 2,000% is sure to attract attention, but even with a shortage in supply, that kind of growth can only show it had a very low base to begin with,” said Yang Hao, an analyst at China Post Securities Co. in Beijing. “Earnings that fluctuate like this do not belong to companies of high quality.”

Yang said the squeeze in supply of white-feathered broilers started when China started to restrict imports due to an outbreak of bird flu a few years ago, while an industry association also puts a cap on supply.

Chinese agricultural stocks are among the biggest winners in the past year, in large part due to the African swine fever that has decimated the country’s pig population and driven up prices. In its 2018 annual report, Yisheng said the hog disease has triggered substitute demand for chicken, boosting consumption and poultry prices. Chicken accounted for 91% of the company’s sales last year.

Wu Tong, an employee at the office of Yisheng’s board of directors, said the company won’t disclose further details until it officially reports earnings for the period on July 25.

To contact Bloomberg News staff for this story: April Ma in Beijing at ama112@bloomberg.net

To contact the editors responsible for this story: Sofia Horta e Costa at shortaecosta@bloomberg.net, Will Davies

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With assistance from Bloomberg