Matters:

Company announcement: The company announced its 2023 performance forecast. The net profit loss for 2023 is expected to be 110-1.4 billion yuan, and a loss of 76 million yuan for the same period last year, further increasing the year-on-year loss margin. In 2023, the company's pig business developed steadily. The number of pigs released was about 3.2 million, an increase of 75% over the previous year, but pig prices continued to fall, and the company's breeding business profit fell sharply year on year, leading to a loss in the company's performance. Due to the drop in pig prices, the company has prepared inventory price reductions for stored expendable biological assets in accordance with corporate accounting standards and the principle of prudence.

Guoxin Agriculture's opinion: 1) Xinwufeng released its 2023 performance forecast. It is estimated that net profit loss due to mother in 2023 will be 110-1.4 billion yuan, an increase in the year-on-year loss margin. Among them, the company expects a net profit loss of 3.51 to 651 million yuan in 2023Q4. Looking at the breakdown, the company achieved about 1.12 million pigs released in 2023Q4. After accounting for the impairment, the operating loss of the pig business is expected to be close to 1.5-450 million yuan. The full cost of commercial pigs is expected to be further improved compared to 2023Q3, and is expected to drop to 17.5-18.0 yuan/kg. 2) The company is one of the high quality and flexible targets with rapid growth in pig breeding in this cycle. In 2023, the number of pigs released by the company increased 75% year on year to 3.2 million. As of the end of June 2023, the number of breeding animals kept in the company was 274,000, of which 198,000 sows can be raised. It is expected that the company will continue the rapid growth trend in 2024-2025. 3) The actual controller of the company is the Hunan Provincial State-owned Assets Administration Commission, which operates steadily at the bottom of the cycle. As of the end of 2023Q3, the company's balance ratio reached 70.15%, the balance of monetary funds reached 1.25 billion yuan, and capital reserves were quite abundant. 4) Risk warning: An uncontrollable pig epidemic death occurred in the industry, cost pressure brought about by an uncontrollable rise in raw food prices, and profit fluctuations caused by large fluctuations in pig prices. 5) Investment advice: As an established farming target for state-owned enterprises, Xinwufeng operates steadily at the bottom of the cycle. The listing growth rate is expected to maintain rapid growth, and it is expected to benefit from the sharp rise in volume and price due to the reversal of the cycle. Considering that the pig price loss in 2023 exceeded expectations, the company's 2023 profit forecast was lowered. The company's net profit for 23-25 is estimated to be -12.5-/ -3.96/2.022 billion yuan (originally estimated to be -8.65/-3.96/2.022 billion yuan), and the corresponding EPS is -0.99/-0.31/1.60 yuan, corresponding to the current stock price PE of -10/-32/6X, maintaining a “buy” rating.