Core views

In 2022, the company achieved revenue of 3.823 billion yuan, an increase of 27.20% over the previous year, and net profit of the mother was 106 million yuan, an increase of 312.30% over the previous year. In 2022, the company sold 41,6938 million live poultry (+14.64% year on year), achieving sales revenue of 1,006 billion yuan (+32.13% year on year); gross margin was 3.60% (+5.07pcts year on year). Due to high feed costs and consumption affected by the epidemic, the company's live poultry sector lost slightly; sold 907 million tons of chilled products (+19.28% year on year), achieving sales revenue of 2,392 billion yuan (+26.77% year on year); gross margin was 27.04% (+0.18pcts year on year), estimated net tonnes The profit may exceed 1,100 yuan. Looking ahead to 2023, we expect the company's live poultry sector to turn a loss into a profit, the chilled fish sector may grow steadily, and other businesses will expand rapidly.

occurrences

The company disclosed its 2022 annual report, achieving revenue of 3.823 billion yuan, an increase of 27.20% over the previous year, and net profit of 106 million yuan, an increase of 312.30% over the previous year; it plans to distribute a cash dividend of RMB 2.00 (tax included) for every 10 shares to all shareholders.

Brief review

1. The yellow chicken market has bottomed out, and the company's profit has increased significantly

In 2022, the company achieved revenue of 3.823 billion yuan (+27.20% year on year), net profit of 106 million yuan (+312.30% year on year); gross sales margin was 19.05% (+1.49 pcts year on year), and net sales margin was 2.96% (+2.01pcts year on year). 22Q4 The company achieved revenue of 1,104 billion yuan (+34.69% YoY, +1.19% YoY), and the net profit of the mother was 0.09 billion yuan (-75.85% YoY, -90.64% YoY)

In terms of expenses: In 2022, the company's sales/management/R&D/financial expenses were 4.36/0.99/0.14/026 billion yuan respectively. The year-on-year changes were +6.09%/+35.53%/+147.54%/+85.02%, respectively. Among them, the increase in management expenses was mainly due to the increase in the scale of operations; the increase in R&D expenses was mainly due to the increase in interest on bank loans and the increase in interest on convertible bonds.

2. The release of live poultry has increased significantly, and many factors have led to sector losses

In 2022, the company sold 41,6938 million live poultry (+14.64% year on year), achieving sales revenue of 1,006 billion yuan (+32.13% year on year), the price per feather was 24.12 yuan (+15.25% year on year), and the cost per feather was 23.25 yuan (+9.50% year on year) with a gross margin of 3.60% (+5.07pcts year on year). During the reporting period, the company's standardized breeding base for 12.5 million high-quality chickens was completed and put into operation at the end of August 2022. Due to the fact that production capacity has not yet been fully released, the net profit of the project did not meet the expected benefits. At the same time, considering high feed costs and the impact of the epidemic, the company's live poultry sector lost overall.

Looking ahead to 2023, in terms of prices, considering that yellow chicken production capacity is still at a low level for nearly 5 years, supply is expected to be tight this year; as consumption continues to recover, demand for yellow chicken is expected to continue to pick up; based on the supply and demand situation, we expect yellow chicken prices to be booming this year. In terms of listing volume, the company plans to expand steadily on the premise of maintaining Hunan's market position. It is expected that the number of entries may increase slightly. Taken together, the company's live poultry business is expected to turn a loss into a profit this year.

3. The scale of chilled food continues to expand, and the sales network continues to improve

In 2022, the company sold 90,700 tons of chilled products (+19.28% year on year), achieving sales revenue of 2,392 million yuan (+26.77% year on year); chilled products sold 26364.53 yuan/ton (+6.27% year on year), cost 19234.43 yuan/ton (+6.01% year on year), gross margin was 27.04% (+0.18pcts year on year). We estimate that the company's net profit per ton of chilled products may exceed 1,100 yuan. By the end of 2022, the company's sales network covered 28 provinces and cities including Beijing, Shanghai, Hunan, Guangdong, Chongqing, Jiangsu, Fujian, and Shaanxi. It had established self-operated chilled fresh counters with large supermarket groups such as Yonghui Supermarkets, Carrefour, Auchan, Da Runfa, Walmart, and China Resources Wanjia, and established strategic partnerships with new retail chains such as Hema Xiansheng, 7FRESH, Sam, Costco, etc.; it had formed a cold chain logistics system for large to medium cities along the Yangtze River from Shanghai to Chengdu, and the Beijing-Pearl Artery. The layout of the Chilled Fresh Network along the route. In 2023, the company will focus on the downturn in the sales network and aim to achieve a county-level market; at the same time, considering the reduction in costs brought about by the company's increased sales volume and increased self-sufficiency in raw materials, sector performance is expected to continue to grow.

4. Laying hens, pork pigs and other businesses are growing in volume

The company's laying business achieved revenue of 231 million yuan in 2022, with a gross margin of 9.55% (+2.42% year-on-year). In terms of pig business, during the reporting period, the company slaughtered 1 million pigs a year and deep-processing project for meat products was completed in June 2022. Due to the extension of the commissioning period and the commercial pig farm still under construction, the slaughter production capacity was not fully released. As production capacity continued to be released in 2023, the project is expected to contribute a good profit. The construction of the company's 10,000 pig breeding base project is expected to be completed in 2023. The completion of the project construction will continue to help the company improve its pig business layout.

5. Profit forecast: Considering the expected boom in yellow chicken prices in 2023, the profitability of the company's live poultry business is expected to improve, the profit of the chilled fish business is expected to rise sharply. Other businesses are expected to show a rapid growth trend with the release of new production capacity and the expansion of market channels. The 2023 performance may increase significantly; the company's performance will grow steadily in 2024-2025 as production capacity is released one after another and product prices are relatively stable. Based on comprehensive considerations, the company is expected to achieve revenue of 4,613/54.12/6.176 billion yuan in 2023-2025, net profit of 2.03/271/307 million yuan, EPS of 1.99/2.66/3/01 respectively, and corresponding PE of 21.48x/16.13x/14.24x, maintaining the “buy” rating.