Introduction to this report:
The popularity of yellow chicken is improving, and commodity chicks and chicken prices are expected to rise in 2024. The company's pig, meat and poultry farming volume continues to grow, and the chilled food business continues to expand. The prepared vegetable factory was put into operation in 2024H2, and new products were launched one after another.
Key points of investment:
Maintaining the “increase in holdings” rating, the target price was lowered to 27.56 yuan. Farming costs were high in 23, and the prosperity for the 24-year cycle was improving, so the 23-year profit forecast was lowered, the 24-year profit forecast was raised, and the 25-year forecast was added. The EPS for 23-25 is expected to be -0.24 (previous value 1.51 yuan) /2.43 (previous value 1.63 yuan) /2.08 yuan. Based on the 24-year 11.34X PE valuation of comparable meat and poultry breeding companies, the target price was lowered to 27.56 yuan (previous value: 40.01 yuan), maintaining the “increased holdings” rating.
The company's breeding market volume continues to grow. It is estimated that the breeding volume will increase to nearly 90 million birds in 2023, and the total volume of poultry farming is expected to be released in 2024, and the breeding volume will continue to grow. The amount of pigs raised is mainly local breeds, and it is estimated that more than 100,000 pigs will be released in 2023.
Chilled food business channels have expanded, and prepared vegetable products have been launched one after another. 2023H1 achieved chilled revenue of 1,023 billion yuan, and is expected to generate more than 2.5 billion yuan in chilled revenue for the whole year, an increase of 4 to 5% over the previous year.
In terms of channels, the continuous development of new retail channels is growing rapidly, and traditional supermarket channels have been expanded to 28 provinces and cities; at the same time, the prepared vegetable factory project will be put into operation in 2024H2. At that time, the company's total production capacity will reach 80,000 tons, and new prepared food products will be launched one after another after production starts.
The popularity of the yellow feather chicken is improving. Currently, parent-generation chicken breeders are at a low level since 2018. In September 2023, the total number of parent-generation breeders was 21.82 million, a year-on-year decrease of 6.11%. The current production and backup stocks were 12.97 million and 8.42 million, respectively. The supply shortage trend is already there. Parent-generation chicken breeding stocks continued to fluctuate at a low level, while the reversal in pig prices on the demand side in 2024 stimulated a recovery in consumption of yellow-feathered chickens, which in turn supported a recovery in commodity chicks and chicken prices.
Risk warning: fluctuations in agricultural product prices, risk of the aquaculture epidemic, etc.