Incident: The company's revenue in 2023 was 3.23 billion yuan, a year-on-year increase, with net profit of 540 million yuan to mother.
The company achieved operating income of 3.23 billion yuan (+52.71% YoY) and net profit to mother of 540 million yuan (+245.1% YoY) in 2023. On a quarterly basis, 2023Q1/Q2/Q3/Q4 revenue was $91/9.4/8.0/570 million yuan, respectively, and net profit to mother was $31/2.5/1.2/-140 million yuan, respectively.
The company's 2023 Q4 revenue was 570 million yuan, and net profit to mother was -140 million yuan. Performance was temporarily under pressure. Benefiting from the gradual increase in the prosperity of the white feather broiler industry, the company's performance in the first three quarters was high year-on-year; however, due to the fall in the price of commercial white feather broiler seedlings in the second half of 2023, the company lost money in the fourth quarter. The annual profit of chicken seedlings was about 600 million yuan, and there were certain losses in the pig business and agricultural and animal husbandry equipment sector. The company achieved operating income of 570 million yuan in 2023Q4 (-17.8% year-on-year); net profit to mother was 140 million yuan, which changed from positive to negative year-on-year, mainly due to lower prices of the company's main products, parent generation and commercial chicken seedlings in the fourth quarter of this year. According to the company's monthly sales report, 2023Q4 sold a total of 140 million white feather broiler seedlings (+2.8% year over month, -19.2% month over month), achieving sales revenue of 420 million yuan (-21.3% year over year, -34.4% month on month); sales of Yisheng 909 small white feather broilers totaled 13.6.57 million units (-47.7% YoY, -34.9% month-on-month), achieving sales revenue of 16.7.09 million yuan (-56.4% YoY, -36.8% month-on-month); sold 1,700 breeding pigs, achieving sales revenue of 5.170 million yuan yuan.
Parent generation prices remain high, and the commodity price upward cycle may begin in 2024H1. Currently, the market is recovering one after another, and the tight supply of chicken seedlings supports prices; furthermore, the chicken hunt was concentrated in November-December of last year, and the short-term supply side is declining. We expect the commodity price upward cycle to begin in the first half of 2024. In 2023, the company's parent chicken seedlings are expected to sell more than 10 million sets, and the estimated sales volume of commercial chicken seedlings is about 600 million. In 2024, the company's estimated production of commercial white feather broiler seedlings is 600 million, which is the same as in 2023. Profit elasticity is high during the boom; Probiotic 909 has a production capacity of about 80 million chickens. Compared with 817 mixed broiler chickens, which reach the same weight, Probiotic 909 can be released 3-5 days early, with remarkable economic benefits.
Investment advice: The company uses the supply of high-generation livestock and poultry breeding sources as its core competitiveness. It is the largest ancestral broiler breeding enterprise in China, and the sales volume of commercial chicken seedlings also ranks first. We expect the company to achieve operating income of 38.14/38.28/38.84 billion yuan and net profit to mother of 997/7.73/621 million yuan in 2024-2026. The corresponding PE was 11.7/15/18.7 times, respectively, maintaining the “gain” rating.
Risk warning: risk of poultry price fluctuations; risk of major epidemics; risk of fluctuations in raw material prices