Incident Overview
The company announced its 2023 performance forecast. During the reporting period, the company expects to achieve net profit attributable to shareholders of listed companies of 1.5 billion yuan to 1.7 billion yuan, an increase of 94.03% to 119.90% over the previous year. Looking at the fourth quarter of a single quarter, the company expects to achieve net profit of 242 million yuan to 442 million yuan, a year-on-year decrease of 46.10% to 70.49%.
Analytical judgment:
Real estate removal progressed smoothly, contributing more than 2 billion yuan in annual profits. The company expects to achieve a net profit of 1.5 billion yuan to 1.7 billion yuan for the whole of 2023. In the first three quarters of 2023, the company's real estate business and pig breeding business achieved revenue of 7.110 billion yuan and 2,050 billion yuan respectively, accounting for 71.62% and 20.65% of revenue, respectively, and achieved net profit of 1,710 billion yuan and -430 million yuan respectively. 2023Q4, the company listed a total of 492,200 pigs (including 27,600 piglets). Based on the average production cost of the company's fattening pigs, the cost and sales price of weaned piglets, we estimated that the company's 2023Q4 pig breeding business lost about 101 million yuan. Due to the further decline in pig sales prices, the company's pig breeding business losses expanded. The real estate business achieved net profit of 1,710 billion yuan in 2023Q1-Q3, and the pig breeding business lost 430 million yuan in 2023Q1-Q3, with a loss of about 531 million yuan for the whole year. We estimate that the real estate business contributed more than 2 billion yuan in net profit for the whole year. The company proposed a strategy to eliminate existing real estate in mid-2019, and so far, it is progressing smoothly.
Pig prices are low, and the pig farming business continues to lose money. Significant cost reductions have reduced losses. In the pig breeding business, the company sold 1.845 million pigs in 2023, +45.92% compared to the same period last year, of which 232,000 were piglets. The pig products were mainly fat pigs, accounting for 87.43%. The pig breeding market pattern in 2023 continued to show that supply exceeded demand, and breeding companies performed poorly throughout the year. According to Wind data, the average price of pigs in 22 provinces and cities in 2023 was 15.26 yuan/kg, -19.22% over the same period. Self-raised pigs were only profitable for 4 weeks throughout the year, with an average head loss of 232.06 yuan/head. In 2023, the sales price of the company's fat pigs showed a trend of rising and then falling. The highest average monthly sales price was 17.2 yuan/kg (August) and the lowest was 13.74 yuan/kg (December). In 2023, the company achieved remarkable results in cost reduction and efficiency. Costs improved significantly in the second half of the year. The average cost of fattening pigs in the first half of the year was 17 yuan/kg. The impact of the epidemic abated in the second half of the year, and the company's costs improved significantly. The average breeding cost of fattening pigs dropped to 14.7 yuan/kg in December 2023, and the decline in the company's costs reduced the losses caused by falling pig prices. According to questions and answers from the company's investors, the average sales weight of the company's fat pigs was 110-120 kg. According to this estimate, the company lost 302.59 yuan to 330.10 yuan for the whole year, benefiting from a significant reduction in costs. Although the sales price of fat pigs in December 2023 was the lowest in the whole year, the company's average head loss was less than 300 yuan.
The operation is steady, and the balance ratio is expected to decrease further
In a context where pig prices continue to be sluggish and the industry is mired in losses, the financial situation of the enterprise is critical to the survival and development of the enterprise. The company's balance ratio will be affected by commercial housing sales. The main reason is that the pre-sale of the company's commercial housing is included in the contract liabilities. By the end of the third quarter of 2023, the company's balance ratio was 73.78%, and the contract debt was 1,757 billion yuan. We estimate that the company's 2023Q4 real estate business is expected to achieve a net profit of 320 million yuan, which means that in the fourth quarter of last year, the company's balance ratio will be further reduced.
Investment advice
Our analysis: (1) The company's pig breeding business is progressing steadily, with 1.845 million heads launched in 2023, and the pig industry sector continues to contribute revenue to the company; (2) The real estate business is a strategically supported business. The real estate business revenue for the first three quarters of 2023 was 7.11 billion yuan. Pre-sale projects were acquired and delivered to confirm revenue one after another, and will continue to contribute considerable revenue and profit to the company. (3) Pig prices continued to be sluggish in 2023, dragging down the performance of the pig breeding sector. Based on this, we maintain a forecast of the company's 2023-2025 revenue of 113.46/111.69/13.922 billion yuan, maintain the forecast of the company's 2023-2025 net profit of 15.08/8.18/1,495 billion yuan, maintain the forecast that the company's 2023-2025 EPS will be 2.84/1.54/2.82 yuan, and the 2024/1/25 stock price of 17.64 yuan corresponds to the 23-25 PE of 6/11/6X, respectively, to maintain a “buy” rating.
Risk warning
There is a risk of price fluctuations in the pig market, the risk that the pig production capacity release process falls short of expectations, the risk that the price of feed raw materials will fluctuate, the risk that real estate project progress and revenue confirmation fall short of expectations, and the risk that a former independent director has been filed by the Securities Regulatory Commission.