[Matters]
On April 7, the company announced that it plans to raise no more than RMB 500 million in additional capital to specific targets in 2023. The target of this issuance is Jiangsu Yike Agriculture and Animal Husbandry Investment Co., Ltd., the controlling shareholder of the company. All of the funds raised after deducting the issuance fee will be used to supplement working capital.
[Comment]
Yike Foods is a leading poultry food enterprise in China. Its main business covers many links in the meat and poultry industry chain, including poultry slaughter and processing, feed production and sales, incubation and sale of commercial poultry seedlings, and the production and sale of cooked food and condiments. In 2022, due to the outbreak of the epidemic and rising breeding costs such as feed, etc., revenue for the first three quarters was 13.312 billion yuan. The company expects net profit of 50-55 million yuan for the whole year, a year-on-year decrease of 57.31%-53.05%. Since the epidemic was fully liberalized in 2023, the poultry market has improved, and the company's operations have gradually returned to stability. At the same time, feed costs have declined. It is expected that the company's operating income will rise sharply in 2023.
The constant increase is expected to enhance the company's capital strength and meet future core business development needs. In recent years, the company's poultry production and operation scale has continued to expand, and operating income has continued to grow. The constant increase can meet the company's capital investment or working capital needs. Especially in the macro-environment of economic downturn, it can fully guarantee the company's stable operation and sustainable development. At the same time, capital reserves can also meet the company's future capital investment needs in breeding, food processing, R&D, and marketing, and support the development of core business.
Optimize the financial structure, reduce the balance ratio, and enhance the company's resilience to risks. In recent years, the company has raised capital through external financing methods such as long-term and short-term bank loans to meet daily operating needs, and the company's overall debt scale and balance ratio have risen. As of September 30, 2022, the company's balance ratio was 59.19%, which is at an all-time high. All of the capital raised by the company in this offering is used to supplement working capital, which is beneficial for the company to expand financing channels, improve the company's balance and liability structure, enhance financial soundness, and enhance the company's resilience to risks.
[Investment advice]
Affected by the epidemic, macroeconomics and the poultry cycle in the past two years, the company's poultry farming has been under tremendous pressure and challenges. However, with the spread of the epidemic and the return of poultry to an upward cycle, it is expected that the company's performance in 2022 will come under pressure, and there will be a marked improvement in 2023. We expect the company's revenue for 2022-2024 to be 177.9/210.9/22.71 billion yuan, an increase of 8.4%/18.6%/7.7% over the previous year; the net profit of the mother was 0.5/30/50 billion yuan, an increase of -53.9%/456.2%/66.3% over the previous year; the corresponding EPS was 0.12/0.67/1.11 yuan respectively, with the corresponding PE being 129/23/14 times, first coverage, giving a “increase in holdings” rating.
[Risk Reminder]
risk of fluctuations in poultry prices;
Avian disease risk.