The company released a pig sales report. In October 2023, pig sales volume was 384,100 heads (including 356,800 commercial pigs and 27,300 piglets), +84.40% year-on-year, +1.69%; total sales revenue was 637 million yuan, +7.12%, and -2.62% month-on-month. From January to October 2023, the cumulative sales volume of pigs was 3.015 million heads (including 2,741,800 commercial pigs and 273,200 piglets), +84.81% year-on-year; sales revenue was 4.804 billion yuan, +56.25% year-on-year.
The pig breeding model is adapted to local conditions, and the scale of publication is expected to grow rapidly. The company has two models of pig breeding in parallel. Longhua Farming and Animal Husbandry adopts the self-breeding and fattening model, and the headquarters mainly focuses on asset-light fattening models such as “company+farmer”. Currently, the ratio between “self-breeding and self-raising” and “company+farmer” models in the company's pig fattening process is about 1:1. In the future, the share of the “company+farmer” model is expected to increase further. From January to October '23, the company's cumulative pig sales volume was 3.015 million heads, +85% year-on-year, including 2,741,800 commercial pigs and 273,200 piglets, accounting for 91% and 9% respectively. In terms of production capacity, the company's layout focuses on consumption regions such as Hunan and Guangdong. As of the end of 23Q3, central China regions such as Hunan accounted for about 60% of production capacity, and southern China regions such as Guangdong accounted for about 25% of production capacity. The rest of the production capacity was mainly distributed in northwest China and northern China. Productive biological assets at the end of 23Q3 were 548 million yuan, an increase of 17% over the previous year at the end of 22Q3. It is estimated that in 23/24, the number of pigs released by the company is expected to reach 3.5 million heads and about 5 million heads, and the number of pigs listed will continue to grow rapidly.
The cost of raising pigs is expected to continue to improve. It is estimated that the current full breeding cost for the company is about 17 yuan/kg, and future breeding costs are expected to continue to be optimized, mainly reflected in several aspects: 1) Continuously increasing the addition of the New Danes breed pigs with high fertility. In the future, the company's pig breeding system will gradually transition from a “New American” to a “New Dan” pig breeding system with high breeding performance. PSY is expected to reach more than 28 heads, reducing the cost of piglets; 2) As the utilization rate of pig production capacity increases, fixed costs are diluted; 3) The nutritional formula of feed is more flexible, and internal feed is more focused on cost performance, thus reducing the cost ratio of feed Cost of materials.
Investment suggestions: In 2023, 2024, and 2025, the company's net profit is expected to be -91 million yuan, 5.1 billion yuan, and 1.26 billion yuan respectively, up -725%, 156%, and 148% year-on-year respectively. The current stock price corresponding to PE is -10, 18, and 7 times, respectively. Maintain the buy rating.
Risk warning: risk of fluctuations in livestock and poultry prices, risk of a sudden outbreak of the epidemic.