On August 30, 2023, Longda Food released its semi-annual report for 2023.
Key points of investment
Performance is in line with expectations, and the cost side is under significant pressure
2023H1's revenue was 6.726 billion yuan (same decrease of 1%), and net profit to parent was 624 million yuan (36 million yuan for the same period last year). The gross profit margin for the first half of the year was -0.96% (same decrease of 5 pct), net interest rate of -9.93% (same decrease of 11 pct), sales expenses rate of 1.18% (same decrease of 0.1 pct), management expenses rate of 1.99% (same increase of 0.1 pct), operating tax and surcharges accounted for 0.16% (same increase of 0.04 pct), and net cash flow from operating activities was -367 million yuan. This was due to an increase in cash for purchasing goods and receiving labor payments. Among them, in 2023Q2, revenue was $3.25 billion (same decrease of 6%), net profit to parent - $646 million (same period last year), gross profit margin -6.99% (same decrease of 12 pct), net interest rate of -21.68% (same decrease of 23 pct), sales expense ratio 1.14% (same decrease of 0.01 pct), management expenses ratio of 2.11% (same increase of 0.2 pct), operating tax and additional share of 0.17% (same increase of 0.1 pct), net operating cash flow - 283 million yuan.
Continue to make efforts to prepare dishes and promote a national layout
By product, 2023H1 frozen meat/cooked food products/prepared dishes/imported trade/other revenue was 47.02/1.16/9.62/6.44/303 million yuan, compared to -9%/-32%/+89%/-12%/+15%. The development of prepared dishes was good. By region, 2023H1 revenue within Shandong Province/Other Regions of East China/Central China/North China/South China/Northeast Region/Southwest Region/Northwest Region/and others was 26.22/19.56/9.33/3.25/1.79/4.05/2.62/44 billion yuan, respectively, +4%/+34%/+59%/-16%/+99%. Looking at the volume-price split, 2023H pig slaughter and meat processing sold 346,600 tons (same decrease of 4%), and the tonnage price was 19,400 yuan/ton (same increase of 3%).
Profit forecasting
We are optimistic that the company will transform into the prepared food race, and the sluggish pig price situation is expected to improve in the third quarter. The EPS for 2023-2025 is expected to be 0.02/0.22/0.38 yuan respectively, and the current stock price corresponding to PE is 454/33/20 times, respectively, maintaining the “buy” investment rating.
Risk warning
Macroeconomic downturn risks, risk of fluctuations in pig prices, progress in prepared vegetables falling short of expectations, recovery in pig production capacity falling short of expectations, etc.