Weak consumption affects terminal prices, and rising costs are a drag on the company's performance. The company disclosed its mid-2022 report that in the first half of the year, the company achieved revenue of 382 million yuan (yoy+7.81%) and net profit of 21.2236 million yuan (yoy-59.15%). In the second quarter alone, the company achieved a revenue of 194 million yuan (yoy-6.21%) and a net profit of 7.5896 million yuan (yoy-78.11%). The decline in the company's performance in the first half of the year was mainly due to: (1) the decline in egg consumption and the weak profit in the egg spot market due to the epidemic; (2) the rise in feed prices and the decline in the profit margin of laying hens; the enthusiasm of farmers to fill the fence is not high; (3) the company entered the southern pink shell laying hen market relatively late, adopted the price following strategy, and the price was lower, which lowered the overall profit level of the company. In the first half of the year, the gross profit margin of the company's main business was 13.55%, down 55.68pct from the same period last year; the unit price of chicken products was about 3.40 yuan per yoy-9.52%.
Production capacity continues to expand rapidly, contributing to a steady increase in market share. In the first half of the year, the company sold 9744.54 million chicken products (yoy+16.12%), including 9556.24 million chicks (yoy+16.53%). During the reporting period, the company continued to expand its production capacity. The Hongsibao Intelligent Agricultural Industry demonstration Park (Phase I) parent breeding base project is expected to put into production of 250000 sets of breeder chickens in November, while the Southern seed Industry Center project began trial production in early August. As of June 22, the company is under construction of 190 million yuan (yoy+88.53%) and productive biological assets of 99.7257 million yuan (yoy+45.42%).
With the advent of the peak consumption season, the cost of superimposed raw materials is falling, and profitability is expected to improve. With the boost of consumer demand such as the start of school and holiday stock, the price of eggs continues to climb to more than 5 yuan / jin. At the same time, the prices of raw materials such as corn and soybean meal have fallen recently, stimulating the enthusiasm of farmers, and chicken seedling prices are expected to pick up gradually in the second half of the year. The company's profitability is expected to continue to improve.
Profit forecasts and investment advice: maintain a "buy" rating. We estimate that the company's EPS in 2022-24 will be 0.48 EPS 0.78max 1.22 yuan respectively. With reference to the industry valuation level, we will value the company's PE in 2023 at 30 times, corresponding to a reasonable value of 23.37 yuan per share, and maintain a "buy" rating.
Risk hint. Major epidemic risk; raw material price fluctuation risk; egg price fluctuation risk.