2023H1 realized home net profit of-39.9 million yuan, year-on-year loss reduction company released a half-year report of 2023. 2023H1 achieved operating income of 1.121 billion yuan, + 75% year-on-year, return to the mother net profit of-39.9 million yuan, reducing losses over the same period last year. Among them, 23Q2 realized operating income of 543 million yuan, + 38% year-on-year and-5.91% month-on-month; net profit returned to its mother was-96.75 million yuan, reducing losses over the same period last year and turning losses on a month-on-month basis. We maintain our profit forecast and expect to record a net profit of 0.07, 619, 000, 000 With reference to comparable Wind's consensus forecast of 13x PE in 2024, and considering that it will take time for the production capacity of cooked food business to climb and there is a long way to go for channel construction, we give Minhe a profit of 12 times PE in 2024, corresponding to the target price of 21.24 yuan, and maintain a "buy" rating.

Rising seedling prices drive income growth, food business construction led to losses in the first half of the company's income growth, loss reduction is mainly due to the obvious rise in the prices of chicken seedlings and other products.

According to the company's monthly sales report, 23H1's chicken seedling sales are + 4.82% year-on-year, and the average sales price is + 107% year-on-year, of which 23Q2 sales price is + 34% year-on-year. From the perspective of business split, we estimate that the profit of 23H1's chicken seedling business is about 20 million yuan, and the profit per feather is about 0.1 yuan 0.2 yuan, of which 23Q2 has a small loss, while the chicken slaughtering, processing and food business has a loss of about 60 million yuan. The food loss is mainly due to the fact that the company's chicken cooked food business is still in its infancy, and the additional 60,000 tons of cooked food production capacity raised by the company is still in the early stage of operation. in the first half of the year, the company focused on improving the output of cooked food and the construction of sales channels, and increased the sales and promotion of cooked food. 23H1's sales expenses were 91.48 million yuan, + 313% compared with the same period last year.

Expand the main business of chicken seedlings, extend downstream food

In 2021, the company raised funds for the construction of new production capacity by issuing non-public shares, including "Annual Stock column 800000 sets of parent Breeders breeding Park Project", "Annual incubation Project of 100 million Meat substitute Primary Incubator", "Weifang Minhe 30,000 ton Meat processing Project" and "Minhe Food 30,000 ton cooked Food processing Project". At the same time, in terms of food sales channels, unlike Chunxue Food and JD.com, which signed an exclusive agreement for the supply of fresh chicken, and Shengnong's development mainly relied on channels such as Tmall's flagship store for sales, Minhe established the Sun Company in Hangzhou, Hangzhou Min Yuehe, which is specially responsible for the e-commerce platform sales of cooked food. At present, it has stores in Tmall and Douyin, and sells through self-broadcast, and the sales momentum is good. In 2022, Minhe products topped the Douyin ecommerce chicken industry sales list TOP1, Douyin ecommerce quality meat store TOP2, and food health industry selfie ranking TOP3. In terms of products, the pistol leg and other products that the company took the lead in creating are quite successful, and although many enterprises have followed, Minhe still occupies a high market share; at the same time, Minhe is launching Tomahawk, chicken legs and other new products one after another, which is expected to become the next explosive product.

Target price 21.24 yuan, maintain the "buy" rating

We expect the company to record a net profit of 0.07, 619, 640 million respectively in 2023-24-25, giving a target price of 21.24 yuan and maintaining a "buy" rating.

Risk tips: rising chicken prices / falling costs are not as expected, sudden large-scale bird flu epidemic and so on.