Incident: The company released its 2023 annual report on March 6. It achieved revenue of 3.22 billion yuan for the full year of 2023, +52.7% year over year; achieved net profit of 540 million yuan to mother, turning a significant loss into profit over the previous year. In Q4 2023, we achieved revenue of 570 million yuan, -17.8% year-on-year, and -29.6% month-on-month; realized net profit of 140 million yuan, -503.9% year-on-year, and -220.3% month-on-month.
The white chicken industry boomed in 2023, and the company's steady volume led to performance growth. Affected by the shortage of overseas breeding since May 2022, the prices of parent generation and commercial chicken seedlings both entered a high boom range in 2023. Combined, the company's production scale continued to expand, and the company's performance continued to unleash. In 2023, the company sold 650 million chicken seedlings (parent generation+commodity generation), +12.3%; the average price was 4.1 yuan/chicken, +47.6% year over year. In 2023Q4, against the backdrop of weak demand during the peak season, the overall supply of chicken seedlings was abundant, leading to a continuous decline in commercial seedling prices, and the company's performance was under pressure. 2023Q4 sold 140 million chicken seedlings (parent generation+product generation), -19.1% month-on-month; average price was 2.9 yuan/piece, -20.0% month-on-month.
Self-developed white chickens have stable performance, and the 2025 scale expansion plan can be expected. The “Prebiotic 909” small white feather chicken cultivated by the company through three series support has remarkable economic benefits. The performance can be stably passed on to future generations. It is suitable for various breeding methods in raised and caged, and sales are rising steadily. In 2023, the company sold 80 million “Yisheng 909” white chicken, +0.5% year over year, average price 1.5 yuan/piece, or -2.8% year over year; of these, Q4 sold 0.1 billion yuan, -34.9% month-on-month, average price 1.3 yuan/piece, -0.4% month-on-month. Furthermore, the new Li Feng white feather broiler introduced by the company has a clear competitive advantage in terms of egg production rate and meat ratio. As the company's parent breeds more chickens and the production of commercial broiler chickens continues to expand, we can expect to achieve the goal of annual sales of commercial white feather broiler seedlings and “prebiotic 909” chicken seedlings by 2025.
The impact of the shortage of seed introduction continues, and both commodity and parent generation child prices are supported. According to the principle of cyclic transmission, the decline in reserve ancestral chicken breeding stocks will generally affect the supply of chicken seedlings from the parent's generation after two quarters, and then the supply of commercial chicken seedlings after three quarters. The shortage of overseas breeding will continue from May '22 to the end of '22, so we expect the trend to continue until 2024H1 as the supply of chicken surrogates for 2023Q4 gradually declines. Furthermore, in 2022 and 2023, the number of domestic white chicken ancestors introduced overseas was only 37,000 to 400,000 sets. Domestic ancestral structural problems still exist, and the supply of high-quality overseas chicken seedlings is still tight. When both parent generation and commodity surrogate prices are supported, the recovery in the downstream demand phase is beneficial to the company's performance growth.
Investment advice: We expect the company's net profit to be 884, 10.11, and 854 million yuan respectively from 2024 to 2026, and EPS of 0.80, 0.91, and 0.77 yuan, respectively, and the corresponding PE is 13, 11, and 13 times, respectively.
As a leading poultry breeding enterprise in China, the company's ancestral broiler breeding scale has ranked first in the country for more than 10 years. The sales volume of commercial chicken seedlings is leading domestically, and it may be the first to benefit from the rise in industry sentiment brought about by the shortage of breeding.
The company raised funds to expand the pig breeding business. In the future, “chicken breeding+pig breeding” two-wheel drive can be expected, maintaining the “recommended” rating.
Risk warning: risk of large price fluctuations of chicken seedlings; risk of animal diseases; risk of price fluctuations of raw materials.