Incidents:

Xiangjia Co., Ltd. released its 2022 annual report: the company achieved revenue of 3.823 billion yuan in 2022, +27.20% year on year; Guimu's net profit was 106 million yuan, +312.30% year on year. Among them, 2022Q4 achieved revenue of 1,104 billion yuan, +34.69% year on year, and net profit of 8.6438 million yuan to the mother, -75.85% year on year.

Key points of investment:

The company achieved revenue of 3.823 billion yuan in 2022, +27.20% year on year; Guimu's net profit was 106 million yuan, +312.30% year on year. Among them, 2022Q4 achieved revenue of 1,104 billion yuan, +34.69% year-on-year, and net profit of 8.6438 million yuan, compared to -75.85% compared with the same period last year. This is mainly due to the fact that the Huangyu broiler industry began to enter a downward trend in November 2022. Look at it by business:

① Live poultry business: In 2022, the yellow feather broiler market fluctuated greatly, and the company's poultry farming production continued to operate well. During the reporting period, the company released 82,5562 million poultry, up 10.33% year on year; live poultry sales revenue was 1,006 billion yuan, up 32.13% year on year; commercial broiler sold 416.938 million, up 14.64% year on year.

② Chilled food business: During the reporting period, the company sold 90,746.25 tons of chilled products, up 19.28% year on year; chilled fresh sales revenue was 2,392 billion yuan, up 26.77% year on year.

Thanks to the company's strategy of developing the chilled poultry products market and speeding up the layout of offline stores, the company's chilled product sales maintained steady growth, which played the main supporting role in the company's profits. The company's chilled business accounted for 62.58% of total operating income.

The expansion of production capacity lays the foundation for long-term development. In 2022, the company headquarters completed and put into operation 420,000 chicken farms, an intelligent incubation center for 100 million poultry seedlings, a vegetable preparation workshop, and a deep processing project for slaughtering 1 million pigs and meat products per year, laying the foundation for the company's long-term development. The funds raised by the company issuing convertible bonds in 2022 will be used to invest in projects such as pig breeding and broiler breeding, which is conducive to achieving the two-wheel drive of the company's broilers and breeding pigs, and further improving the company's ability to withstand risks and profits.

The intensity of R&D investment continues to increase. In 2022, the company spent 135.25 million yuan on R&D, an increase of 147.54% over the previous year, mainly due to the company's increased investment in poultry breeding research and development.

During the reporting period, the R&D projects promoted by the company included “deep processing of meat products”, “breeding of high-quality broiler breeding and technical system upgrade”, “Xiangxi black pig breeding and development of the Xiangjia black pig supporting system”. It is expected that the above projects will further extend the company's industrial chain, enhance the company's product competitiveness, increase the company's supply of high-quality local varieties, and enhance high-quality channels and user stickiness. The company focuses on the five major related industries of chicken, eggs, pigs, fertilizer, and oranges to open up a whole green organic circular agriculture industry chain.

Profit forecasts and investment ratings Considering that yellow chicken consumption is expected to improve with the recovery of restaurants in 2023, we adjusted the company's net profit to 2.15/367/404 million for 2023-2025, corresponding to PE 20.31/11.89/10.81 times, respectively. The future shift of yellow feather chicken consumption to chilled live poultry is the general trend in the industry, maintaining the “buy” rating.

The risks indicate the risk of poultry outbreaks; the risk of fluctuations in raw material prices; the risk of food safety; the risk of the company's performance expectations not meeting standards; the risk of fluctuations in product prices; the risk of liquidity risk in the secondary market, etc.