This report is read as follows:

Due to the weak demand for pig feed and chicken prices in the industry, 2023H1 reported results slightly lower than expected. For the whole year, the feed business has developed steadily, and the meat and poultry industry is expected to reverse soon, which will boost the company's performance.

Main points of investment:

Maintain the "overweight" rating. The recovery of 2023H1 chicken demand side is lower than expected, and the performance of pig feed industry is weak, so the 23-year EPS is reduced to 0.26 shock 0.80 yuan (the previous value is 1.26 yuan 1.36 yuan), and the 25-year EPS is forecast to be 0.83 yuan. With reference to the valuation of comparable companies, the 2024 feed business is given 10X PE with a market capitalization of 4 billion; meat and poultry breeding and slaughtering is given a market capitalization of 25 times PE, with a total market capitalization of 14 billion, corresponding to the target price of 15.23 yuan (the previous value is 18.27 yuan), maintaining the "overweight" rating.

The performance of the report was slightly lower than expected. 2023H1 achieved revenue of 16.708 billion, year-on-year + 21.19%, mother net profit of-25 million, year-on-year-154.37%, feed sales growth of more than 10% in the first half of the year, break-even in the meat and poultry sector, pig farming dragged down the performance, and the overall profit was slightly weaker than expected.

The feed business is developing steadily. Due to the deep loss of the aquaculture industry, the price of raw materials fluctuates greatly, the sales pressure of the feed industry is great, and the competition in the stock market is fierce. From a variety point of view, the growth rate of pig feed and ruminant is stable, and the demand for meat and poultry is relatively strong. It is expected that the company's feed sales will increase by 1015% in 2023, and it is optimistic that the company will continue to improve its market share in the competition in the feed industry.

The meat and poultry industry expects a reversal soon. 2023H2 White Feather Chicken scene demeanor has been improved. On the one hand, the logic of the introduction gap in the early stage remains unchanged, the supply side production capacity contraction conduction is smooth, in the second half of the year, the generation of birth parents is expected to decrease month-on-month, and the continuous tightening of supply will lead to a reversal in the price of white-feather broilers in the later stage. On the demand side, it has gradually entered the peak demand season, while pig prices have also boosted chicken prices. Based on the reversal of the meat and poultry industry, optimistic companies benefit from the reversal of the industry and boost their performance.

Risk hints: feed raw material fluctuation risk, animal disease risk, livestock price fluctuation risk and so on.