With the steady growth of feed business and reduction of losses in pig business, with the advent of the era of biological breeding industrialization, the company grasps the period of strategic opportunity with "endogenesis + extension". Be optimistic about its medium-and long-term development prospects and maintain the "highly recommended" investment rating.
The feed business grew steadily and the loss of pig business was reduced. In the first three quarters, the company realized revenue of 23.9 billion yuan (yoy+8%), vested net profit loss of 910 million yuan (loss of 330 million yuan in the same period last year) and EPS-0.22 yuan, of which 23Q3 realized revenue of 8.27 billion yuan (yoy-5%), vested net profit loss of 130 million yuan (yoy-175%) and EPS-0.03 yuan. The performance is in line with expectations. The low pig price in the third quarter is the main reason for the pressure on the company's performance: 1) Live pigs: the company put out 4.16 million (+ 38%) in the first three quarters, of which 2.6 million (+ 39%) were listed by the holding subsidiary. It is estimated that the complete cost of the company is about 1819 yuan / kg, showing a downward trend as a whole, some platforms may be less than 16 yuan / kg, while the average pig price of Q3 company is estimated to be about 15.5 yuan / kg. Pig prices are low, but the loss in the third quarter is narrower than that in the third quarter; 2) seed: the third quarter is the traditional off-season of the seed industry, affected by seasonality or in a state of loss 3) Post-cycle: the company actively responds to the fluctuation of raw material prices and constantly optimizes the structure of feed products. It is expected that the growth rate of its feed business in the third quarter is better than that of the industry, the basic position of feed business is constantly consolidated, and the overall steady growth.
23Q4 aquaculture plate profit is expected to repair, feed business boom is expected. The company plans to release about 5.5 million in 2023 (76% in the first three quarters). With the seasonal pick-up in pig prices in the fourth quarter and further improvement in the company's farming costs, the profits of the 23Q4 farming business are expected to continue to repair. In addition, feed demand is improving in the fourth quarter, the cost of raw materials such as corn has declined, and the company's feed product structure optimization, feed sector profits are expected to improve and continue to contribute to stable cash flow.
With the advent of the era of biological breeding industrialization, "endogenesis + extension" seize the period of strategic opportunity. Biological breeding has entered the era of industrialization, the company has a certain first-mover advantage and strong product advantage in the character end; not only in the recent publicity of transgenic varieties, the proportion of the character end is higher, and the planting plot of genetically modified products planted this year is stable, the field performance is good, and the medium-and long-term development prospects are bright.
Maintain the "highly recommended" investment rating. It is expected that the seasonal warming of 23Q4 pig prices may lead to the improvement of profits of the breeding business and support the prosperity of the feed business; the company's seed industry strategy ranks first, endogenous + epitaxial two-wheel drive, rich reserves of products and technology, and the era of biological breeding is expected to open up new growth space. Combined with the previous operating situation of the company and the recent trend of pig prices, the company's profit forecast for 2023-2025 is lowered. It is estimated that the company's EPS in 2023-2025 will be-0.05max 0.17max 0.29 yuan respectively, maintaining the "highly recommended" investment rating.
Risk tips: pig price performance / company scale expansion is lower than expected, sudden large-scale uncontrollable epidemic; natural disasters, the progress of GM commercialization is not as expected.