2023Q3 realized a net profit of-78 million yuan, and the company released its three-quarter report for 2023, year-on-year loss increase and month-on-month loss reduction. In the first three quarters of 2023, the company realized operating income of 1.632 billion yuan, + 50% year-on-year, and return to its mother's net profit of-118 million yuan, reducing losses over the same period last year. Among them, 23Q3 realized operating income of 511 million yuan, + 15% year-on-year and-5.92% month-on-month; net profit returned to its mother was-78 million yuan, increasing losses over the same period last year and reducing losses compared with the previous year. We maintain our profit forecast and expect to record a net profit of 0.07, 619, 000, 000 With reference to the comparable company's Wind consensus forecast of 11x PE in 2024, and considering that it will take time for the production capacity of the cooked food business to climb and there is a long way to go for channel construction, we give Minhe a profit of 10 times PE in 2024, corresponding to the target price of 17.7 yuan and maintaining a "buy" rating.
Chicken seedlings make a small loss, and the cost of food business is a drag on profits.
23Q3's revenue increased year-on-year and the loss deepened or mainly due to an increase in sales of the company's cooked food business, but the cost is still large and has not yet made a profit. Specifically, the sales revenue of 23Q3's chicken seedling business is about 151 million yuan, down 4.6% from the same period last year, of which the sales volume is-0.4% year-on-year and the average sales price is about 4.1% year-on-year. We estimate that the loss of the company's chicken seedling business is about 10 million yuan, with a slight increase in losses over the same period last year. 23Q3's revenue growth except chicken seedling business is about 25% year-on-year, incremental or mainly from the food business, income growth but significantly increased losses, or mainly because the company's chicken cooked food business is still in its infancy, the new 60,000 tons of cooked food production capacity is still in the early stages of operation, the company is currently or focused on the improvement of cooked food production and the construction of sales channels, to increase the sales and promotion of cooked food. The sales cost of 23Q3 company is 42.2 million yuan, which is + 72% compared with the same period last year. In the first three quarters, the company's cumulative chicken seedling sales and average price increased by 3% and 62% respectively compared with the same period last year, driving the company's chicken seedling business income to increase by about 67% compared with the same period last year, and the company's net profit reduced its loss compared with the same period last year (a loss of 332 million yuan in 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 terms of products, the company took the lead in creating pistol legs and other products are quite successful, and continue to launch Tomahawk chicken legs and other potential popular styles.
Target price 17.7 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 17.7 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.