Net profit loss to mother in 2023 - 480 million yuan ~ - 540 million yuan. The company issued a 2023 performance forecast: achieving net profit to mother of 480 million yuan to -540 million yuan. On a quarterly basis, net profit for Q1, Q2, Q3, and Q4 was -190 million yuan, -140 million yuan, -86 million yuan, and -164 million yuan to -124 million yuan, respectively. Q4 Reasons for continued losses: ① In the first half of the year, due to the epidemic, the factory's renovation, upgrade, and daily operation expenses were about 30 million yuan; ② depreciation, interest, etc. expenses under construction were about 29 million yuan; ③ slaughterhouses lost 3-4 million yuan; ④ losses from normal operation of pig farms were about 30 million yuan.
The 2023 release target was basically completed. The total cost of Q4 pigs fell month-on-month in 2023. The company's pig business revenue was 983 million yuan, a year-on-year decrease of 15.3%. The number of pigs released was 624,600, an increase of 20.1% over the previous year, and the annual target of 650,000 pigs was basically completed.
At the end of December 2023, the company was able to keep 45,000 sows, laying a solid foundation for the 2024 target of 80 to 1 million pigs. On a quarterly basis, the pig business revenue of 2023Q1, Q2, Q3, and Q4 companies was 310 million yuan, 220 million yuan, and 220 million yuan respectively, up 46.4%, 0.5%, -27.5%, and -46.4% year on year; the number of pigs released was 209,900, 156,500, 137,900, and 120,300, which increased 66.9%, 33.8%, and -23.0% year-on-year. The decline in sales volume was mainly due to early elimination of backward production capacity. From October to December 2023, the average sales price of the company's commercial pigs was 17.85 yuan/kg, 16.66 yuan/kg, and 16.18 yuan/kg, respectively. We estimate that the full cost of pigs operating the Q4 company's normal pig farm has dropped to about 17.3 yuan/kg, down 0.5 yuan/kg from Q3. With the continuous improvement of production capacity utilization and epidemic prevention and control capabilities, the company's total pig cost is expected to drop further.
The mid-term elimination logic of pig production capacity remains unchanged. The short-term rebound in piglet prices fluctuates in January. According to data from the Bureau of Statistics and the Ministry of Agriculture, the number of sows that can reproduce nationwide increased by 1.8%, 1.8%, 2.9%, 2.6%, and 0.4% year on year, respectively. At the same time, pig breeding efficiency improved in 2023. We roughly estimate that 1H2024 production efficiency is expected to increase by nearly 10% compared to 1H2023. 1H2024 is expected to increase the number of pigs released in China by 10% year on year, and pig prices are likely to increase by 10% year on year. Level for the first half of 2023. According to Pig Yitong data, the average price of 1H2023 pigs is 14.7 yuan/kg, the lowest price is 13.7 yuan/kg. The price of 1H2024 pigs is expected to fall below at least 13 yuan/kg. The price of pigs continues to be sluggish, which is expected to accelerate the loss of production capacity. In the short term, there has been a sharp rebound in the price of piglets, which will slow down the breeding and elimination of sows in January 2024.
Investment advice
The company is an important supplier of high-quality pigs in China's Guangdong-Hong Kong-Macao Greater Bay Area. We expect the company to release 620,000 pigs, 900,000 heads and 1.6 million heads in 2023-2025, achieving operating income of 1,124 billion yuan, 1,956 billion yuan, and 3.631 billion yuan, up -7.6%, 74%, and 85.7% year-on-year, corresponding to net profit attributable to mother of -490 million yuan, -81 million yuan, and 595 million yuan. The net profit to mother was before 2023-303 million yuan and 2024 251 million yuan and 571 million yuan in 2025. The reason for this large adjustment is that pig prices and release expectations for 23-25 were revised, and the “buy” rating remained unchanged.
Risk warning
The epidemic; pig prices rose later than expected.