Net profit attributable to the mother in 2022/23Q1 is $75/021 million
The company released its 2022 annual report and the first quarter report of 2023:2022 achieved operating income of 16.116 billion yuan, yoy -17.39%, achieved net profit of 75 million yuan to the mother, and reversed losses over the previous year (loss of 659 million yuan in 21), in line with our expectations (76 million yuan), 23Q1 operating income of 3.477 billion yuan, YOY +4.09%, and Guimo's net profit of 21 million yuan. The 22Q4 company achieved operating income of 4.664 billion yuan, YOY +17.13%, and achieved net profit of 26 million yuan to the mother, reversing losses over the same period last year (loss of 996 million yuan in the same period in '21). We maintain the company's 23-24 profit forecast and give a 25-year forecast. The company's net profit for 23-25 is estimated to be 279, 386, and 562 million yuan respectively, and the corresponding EPS is 0.26, 0.36, and 0.52 yuan respectively. Referring to the comparable company's 44-fold PE valuation in 23 years, we gave the company 44 times PE in 23 years, with a target price of 11.44 yuan to maintain the “buy” rating.
Reversing losses in '22, looking forward to further progress in prepared dishes in '23
The company turned a loss into a profit in '22, mainly due to reduced losses in the farming business and steady development of the slaughter and prepared vegetable business. 1) Slaughter: Sales of 620,000 tons of fresh frozen meat, contributing revenue of 120,031 billion yuan, gross profit margin of 1.74%, +0.27pct over year; 2) Prepared food: annual revenue of 1,314 billion yuan, an increase of 11.16%, mainly benefited from the increased contribution of the company's B-side customers. The gross profit margin was 10.4%, +1.4pct year on year. The main reason was that B-side customer scale effect was gradually reflected; 3) Cooked food: contributed revenue of 337 million yuan, -6% year on year; 4) Farming: 5012 million heads were sold, an increase of 25.65% over the previous year. In 23Q1, the company's net profit was basically the same. Considering that the 22Q1 company recovered 707 million dollars of impairment, and the net profit of the company's main business increased year-on-year in 23Q1, we think it was mainly due to the contribution of the company's meat/prepared food business.
The buyback plan showed confidence, and “two wings in one” progressed steadily
The company issued a repurchase plan in November '22. It plans to use its own capital to repurchase 3-5 billion yuan of shares within a year to motivate future employees. The repurchase amount is large, demonstrating the company's confidence. Since establishing prepared vegetables as its core business in '21, the company has implemented a “integrated two-wing” strategy supported by slaughter and farming. At present, the company has basically completed the nationalization layout, and has achieved national development in terms of production capacity construction and channel expansion. In terms of business planning, the company focuses on B-side prepared dishes, taking advantage of excellent quality control, slaughter and processing experience, innovative food research and development, etc., to continuously expand the revenue scale of B-side customers. In terms of products, on the basis of advantageous products such as crispy meat, fatty sausage, bacon, grilled sausage, and prepared pork belly, the company further cooperated deeply with major customers to develop customized prepared ingredients and prepared semi-finished products, effectively binding large customers.
The target price is 11.44 yuan, maintaining the “buy” rating
We maintain our profit forecast. The company's net profit for 23-25 is estimated to be 2.79, 386, and 562 million yuan respectively. The corresponding EPS is 0.26, 0.36, and 0.52 yuan respectively, and the target price is 11.44 yuan (previous value 10.40 yuan), maintaining the “buy” rating.
Risk warning: The recovery of pig production capacity is falling short of expectations, the risk of African swine fever epidemic, food safety risks, channel development results falling short of expectations, product development falling short of market demand, risk of pig price fluctuations, etc.