The feed and breeding industry performed well, and sluggish pig prices and depreciation measures dragged down performance. In the future, the company will adhere to the strategic goal of “leading the breeding industry, consolidating feed, and adjusting pig farming”, and continue to optimize and upgrade the three major business segments. Optimistic about medium- to long-term development prospects.

The feed and breeding industry performed well, and sluggish pig prices and depreciation measures dragged down performance. Dabeinong is expected to have a net profit loss of 1.8 to 2.2 billion yuan in 2023 (profit of 56 million yuan for the same period last year) and EPS-0.54 to -0.44 yuan; of these, 23Q4 had an advance loss of 89~1.29 billion yuan (yoy -5%) and EPS-0.31 to -0.22 yuan. Sluggish pig prices and depreciation are the main factors putting pressure on the company's performance: 1) Feed: The company actively responds to fluctuations in raw material prices, actively promotes business model transformation, and gives full play to the core advantages of the feed business. The net profit of the feed business increased by more than 60% year on year, the basic position of the feed business continued to be consolidated, and the overall performance was superior to the industry; 2) Seeds: The fourth quarter was the peak sales season for the seed industry, and the company's breeding industry performed well, and increased by nearly 50% year-on-year; 3) Pigs: The company is expected to list 6.05 million heads (+36.5%, over 36.5%) (Amount to meet the annual target), Among them, the holding subsidiary listed 3.66 million heads (+39%); the total cost of the company is estimated to be about 18 to 19 yuan/kg, down from the previous period. Some platforms may be less than 16 yuan/kg, while Q4's average pig price estimates about 13.9 yuan/kg. The farming sector lost money due to low pig prices, and the loss margin increased compared to the previous quarter. 4) Combining biological assets at the end of the period, impairment estimates of long-term investment and outstanding matters, etc., the company estimates that impairment losses will be about 700 to 10 billion yuan; the impact of transactional financial liabilities on profit and loss is estimated at about 100 million yuan.

Feed is steady, moderate and improving, and farming continues to promote cost reduction efforts. In terms of feed, the company has a good foundation for high-end materials such as premixes, training feed, and nursery feed. At the same time, varieties such as ruminant feed and aquatic food have been differentiated. As the cost of raw materials such as corn and soybean meal falls significantly, the profit of the feed sector is steady, moderate and positive, and is expected to continue to contribute to stable cash flow. In terms of breeding, pig production performance is improving, and the company will continue to push for cost reduction in 24 years. Currently, there are certain differences between pig farming platforms. Platforms with gaps are learning from benchmark platforms and pig farms to continuously improve breeding capabilities. There is still room for optimization of the company's comprehensive breeding standards in the future.

The era of industrialization of biological breeding has arrived, and “endogenous+extension” seizes a period of strategic opportunity. Currently, the reshuffle of the traditional seed industry is accelerating, and the company supports the expansion and strengthening of the seed industry sector through various methods such as endogenesis, epitenesis, and cooperation. Biological breeding has entered the industrial era, and the company has a certain first-mover advantage and strong product advantages in terms of traits; not only did the first batch of genetically modified varieties that have been tested account for a higher proportion of traits, but judging from commercial pilots, downstream partners, and the coverage area of genetically modified varieties, etc., the company's biological breeding technology has both quantitative and qualitative advantages, and the prospects for medium- to long-term development are clear.

Maintain a “Highly Recommended” investment rating. The feed sector is steady, moderate and improving. The company is actively promoting business model transformation, with the goal of achieving 10 million tons of sales in 2025; the pig farming business is the core, and the breeding level is constantly improving; the breeding industry has the highest strategic ranking, endogenous+epitaxial two-wheel drive, rich product and technical reserves, and the biological breeding era is expected to open up new growth space. Based on recent pig price performance and the company's performance forecast, the company's profit forecast for 2023 to 2025 was lowered. The company's EPS is expected to be -0.48/0.10/0.28 yuan respectively from 2023 to 2025, maintaining a “highly recommended” investment rating.

Risk warning: Pig price performance/company scale expansion fell short of expectations, large-scale uncontrollable outbreaks occurred suddenly; natural disasters, commercialization of genetically modified genes fell short of expectations.