Introduction to this report:
The company's costs gradually declined in the third quarter, and the costs of 2023Q4 are expected to continue to be reduced through continuous adjustments in farming efficiency, etc. Currently, the company has abundant cash flow, and future growth can be expected.
Key points of investment:
Maintaining the “increase in holdings” rating, the target price was lowered to 11.29 yuan. Due to the long-term slump in pig prices in '23, the pig price forecast for '23 was lowered; the company lowered its release target for 24-25 after the three-quarter report, so the number of heads released in 24-25 was lowered to 3.54 million, and the EPS for 23-25 is expected to be -0.41/0.66/0.78 yuan (previous value: 0.47/1.19/1.17 yuan). Using the segmented valuation method, the 24-year feed business was given 13XPE, animal insurance 22XPE, and breeding 12X PE. The feed, animal insurance, and breeding sectors were given a market value of 39, 66, and 4.8 billion, respectively, with a target market value of 15.3 billion yuan, and a target market value of 15.3 billion yuan. The target price was lowered to 11.29 yuan (previous value of 13.56 yuan), maintaining the “increase in holdings” rating.
Incident: 231,400 heads were sold in October '23, with a total sales volume of 2.289,700 units in the first 10 months.
The peak season is not strong, and production capacity continues to decline. We are optimistic that the farming boom will improve in 2024. Pig prices were sluggish in the first three quarters of the year 23. We believe that Q4 pig prices are expected to continue to be weak, mainly due to low price sell-offs and increased supply from frozen meat and the elimination of sows. 2023Q4 The peak season for pig prices is sluggish. Weak pig prices have led to a downturn in sentiment on the breeding side, and the continuous removal of production capacity has exceeded expectations. Production capacity will continue to be removed in 2023, and the farming boom is expected to improve in 2024.
Farming costs have gradually declined, and cash flow is plentiful. At the end of the three-quarter report, the company's farming costs have reached the estimated cost target of 16.5 yuan/kg at the beginning of the year. Costs are improved through efficiency improvements, population renewal, and epidemic prevention and control. Costs are expected to continue to decline in 2023Q4, and are expected to drop to 15 to 15.5 yuan/kg in 2024. The company currently has abundant cash flow, providing financial support for future growth. As of the end of 2023Q3, the company had a monetary capital of 3,845 billion dollars, a balance ratio of only 47.06%, and sufficient financial support for future expansion.
Risk warning: large fluctuations in agricultural product prices, risk of aquaculture diseases, etc.