The performance is in line with the forecast. 23H1 income 9.08 billion yuan, year-on-year + 4.2%, return to the mother of a loss of 990 million (22H1 of 220 million, from profit to loss). The gross profit margin of 23H1 raw milk business was 28.3%, down 3.9PCT from the same period last year. The main reason is that the price of raw milk continues to fall, and the superimposed feed is still high. Due to the adjustment of cattle valuation, the fair value loss of biological assets increased significantly to 2.26 billion (22H1 is 850 million). The company's cash EBITDA was 1.81 billion, down 1.8 per cent from a year earlier.
There is already support at the bottom of milk prices, and Q4 is expected to rise. 23H1 raw milk business revenue of 6.16 billion yuan, year-on-year + 18.0%. In terms of split weight price, the total sales volume was 1.402 million tons, a sharp increase of 24.4% compared with the same period last year, but the average selling price was 4.39 yuan / kg,-5.1% compared with the same period last year. 23H1 milk prices are declining rapidly, but we are not pessimistic about raw milk prices in the future. Factors such as the rapid withdrawal of small and medium-sized pastures this year, the boost of downstream demand, the narrowing of the price gap at home and abroad, and the high level of feed are all supporting the price of raw milk at the bottom. According to the Ministry of Agriculture, the average price of raw milk in the main producing areas has stabilized at about 3.76 yuan / kg for about two months since mid-July. We believe that the Q4 industry is expected to improve this year, supply and demand will gradually match, and milk prices will gradually start an upward cycle.
The feed cost can be controlled upwards, and the per unit yield is outstanding. The feed cost of kilogram milk of 23H1 company is 2.49 yuan, which is + 2.5% compared with the same period last year. Under the condition of high commodity prices, the year-on-year increase in feed cost of kilogram milk can be controlled, mainly due to strengthening procurement timing, adjusting feed formula and increasing cow yield per unit area. The per unit yield of 23H1 was 12.2t, a sharp increase of 7 per cent over the same period last year. The effect of the company's integration with the acquisition company was highlighted, with a significant increase in unit yield. Previously, the Fonterra ranch yield increased by 15.2 to 12.9 tons, and Secco Star increased by 5.5% to 11.5 tons.
Affected by the adjustment of cow valuation, the fair value loss of biological assets has increased significantly. The rapid decline in the price of 23H1 raw milk and the high feed cost have led to a decrease in the valuation of adult cows; at the same time, the price of eliminated beef has fallen; the valuation of reserve cattle has also been reduced due to the increase in feeding costs, and the proportion of excellent reserve cattle is relatively high (47% of 23H1 adult cows and 53% of calves and mature cattle). For the sake of accounting prudence, the fair value loss of biological assets accounted for by the company reached 2.26 billion, significantly higher than in previous years, 410 million for 21 years and 1.62 billion for 22 years.
Ruminant breeding systematic solution business is under pressure, the company takes the initiative to adjust.
The income of 23H1 ruminant breeding systematic solution business (including feed, milk supermarket, breeding) was 2.92 billion yuan, down 16.3% from the same period last year, but the gross profit margin remained basically stable. Among them, the feed business adjustment is more obvious, 23H1 concentrate feed sales of 449000 tons, down 14.4% from the same period last year. Mainly due to the low prosperity of the aquaculture industry and large-scale losses in small and medium-sized pastures, the company strengthens risk control, adjusts sales strategy, and focuses on high-quality customers.
Profit forecast and investment advice: based on the lower-than-expected performance this year, we reduce our profit forecast, but we are not pessimistic about the future price of raw milk. We estimate that the company's revenue in 2023-2025 will be 191.0-2.38 billion yuan, respectively (the previous value is 208.3 million), and the net profit will be 1.18 billion yuan in return to the parent (the previous value is 82pm), and the EPS in 2023-2025 will be-0.29 pound 0.30 pound 0.48 yuan (the previous value 0.220.37 pound 0.54 yuan). Taking into account the valuation of comparable companies and the prosperity of the industry is expected to rise, Youran Animal Husbandry will be given 9 times PE in 2024 (the previous 11xPE in 2023), raising the target price to HK $2.85 (1HKD=0.9361CNY, the previous target price of HK $2.70), maintaining a "better than the market" rating.
Risk tip: commodity prices are on the upside and downstream demand recovers less than expected.