Event

According to the company's report for the third quarter of 2022, the revenue in the first three quarters was 15.403 billion yuan, an increase of 15.62% over the same period last year, and the net profit of 2022Q3 was-573 million yuan, down 13.89% from the same period last year. 2022Q3 realized revenue of 6.585 billion yuan, an increase of 29.07% over the same period last year, an increase of 41.25% over the previous year, and a net profit of 104 million yuan, an increase of 130.57% and 132.00%, respectively.

Brief comment

1. Benefiting from the breeding boom, the company's performance in the third quarter turned from deficit to profit.

In the first three quarters of 2022, the company achieved revenue of 15.403 billion yuan, an increase of 15.62% over the same period last year, and a net profit of-573 million yuan, a decrease of 13.89% over the same period last year. 2022Q3 realized revenue of 6.585 billion yuan, an increase of 29.07% over the same period last year, an increase of 41.25% over the previous year, and a net profit of 104 million yuan, an increase of 130.57% over the same period last year and 132.00% over the previous year, mainly due to the increase in the number of live pigs and the recovery of pig prices. Sub-business plate, the company's 2022Q3 feed business profit is expected to exceed 40 million yuan, breeding sector profit of about 220 million yuan (including minority shareholders' rights and interests), food and slaughtering or break even, headquarters expenses of more than 110 million yuan.

In terms of profit margin, the company's sales margin for the first three quarters of 2022 was 3.28% (year-on-year-1.58pcts, month-on-month + 4.30pcts), net sales margin was-4.89% (year-on-year-0.66pcts, month-on-month + 5.36pcts), 2022Q3 sales gross margin was 9.03% (year-on-year + 11.38pcts, month-on-month + 9.22pcts), and net sales margin was 2.28% (year-on-year + 11.42pcts, month-on-month + 11.24pcts).

In terms of expenses, the company's sales expenses in the first three quarters of 2022 were 300 million yuan (year-on-year + 29.34%); management expenses were 475 million yuan (year-on-year + 14.00%); financial expenses were 403 million yuan (year-on-year + 35.02%); and R & D expenses were 113 million yuan (year-on-year + 42.87%).

In terms of asset structure, as of the end of September 2022, the company's asset-liability ratio was 79.16%, a decrease of 5.14pcts compared with the end of June 2022.

2. The feed business is developing steadily, and the gross profit margin is higher than the previous month.

2022Q3 achieved feed sales of more than 800000 tons, an increase of about 4% over the same period last year and about 25% month-on-month growth (mainly due to downstream farming profits, driving feed sales growth). In the case of rising raw material prices, the company increases its profitability by raising product prices, replacing raw materials, and increasing sales of high-margin products, and the gross profit margin of the company's feed business is higher than that of 2022Q2. Looking forward to 2022Q4, the enthusiasm of downstream aquaculture has improved or led the company's product sales to continue to improve, the superimposed gross profit margin is relatively stable, the feed sector is expected to contribute stable profits.

3. The pig business is profitable, and there is still room for cost reduction.

① fencing: the number of pigs produced by 2022Q3 is 1.3789 million (year-on-year + 74.10%, ring ratio + 6.31%). From the fattening structure, we estimate that fattening pigs account for about 38%, and piglets account for nearly 60%. In terms of ② cost, with the increase of capacity utilization, the breeding cost of the company was slightly lower than that of 2022Q2, in which the breeding cost of fattening pigs was about 18.6 yuan / kg and that of weaned piglets was 410-420 yuan per piglet. ③ production capacity: by the end of September 2022, the company's productive biological assets were 1.249 billion yuan, an increase of 9.08% over the end of June. The stock of sows is nearly 370000, of which more than 300000 can be reproduced, and the number is expected to increase to 340000 by the end of the year. Looking forward to 2022Q4, the high shock of pig prices superimposes the marginal improvement of the company's costs, and the profits of the pig farming sector are expected to grow further.

4, profit forecast and rating: the company's feed sector has developed steadily, and pig farming has benefited from the boom in pig prices and marginal improvement in costs. we estimate that the company's operating income in 2022-2024 will be 231.52x33680xpx 44.372 billion yuan, its net profit will be-2.39pm 473pm 992 million yuan, and EPS is-0.35ppm 0.69max 1.45 yuan per share, maintaining the "overweight" rating.

Risk hint: ① livestock and poultry epidemic risk: animal disease will cause serious damage to livestock and poultry production, impact on upstream feed demand, and pig breeding industry may be greatly affected. Risk of price fluctuation of ② main raw materials: when raw material prices fluctuate sharply, the company fails to adjust product sales prices in time or fails to control the cost of feed raw materials, it may adversely affect the company's business. ③ pig price fluctuation risk: the pig farming industry has a certain periodicity, the company's pig farming business may face the risk of performance fluctuations or even significant decline and losses. ④ other risks: the risk of higher asset-liability ratio, the greater risk of accounts receivable, the risk of external guarantee, and so on.