Event: The company publishes its 2023 annual report. The company's revenue in '23 was 2,074 billion yuan, +28.96% year on year; net profit to mother was 386 million yuan, +14.54% year on year; net profit after deduction was -401 million yuan, +12.99% year on year. Looking at a single quarter, 23Q4's revenue was 442 million yuan, -15.57% year over year; net profit to mother was 268 million yuan, -123.47% year over year; net profit after deduction was -279 million yuan, -130.89% year on year.
Benefiting from the increasing prosperity of the white chicken industry, the company's revenue increased & performance loss decreased in 23 years. The reason for the year-on-year improvement in the company's performance in 2023 is mainly due to factors such as tight supply of chicken seedlings and increased enthusiasm on the breeding side, and the price of chicken seedlings rose to a high level. As a result, the company's products instead of chicken seedlings and chicken products all showed a sharp rise in volume and price. The company's comprehensive gross profit margin in '23 was 3.28%, +10.74pct; the cost ratio for the period was 15.47%, +0.89pct year over year, mainly due to the increase in the company's cooked food production, the company's increased sales and promotion efforts, and a sharp increase in sales expenses. Looking at a single quarter, the 23Q4 company's comprehensive gross profit margin was -26.31%, 31.43pct year on year; the cost ratio for the period was 16.01%, -1.43pct year on year.
The volume and price of the company's chicken seedlings rose sharply in '23, and profitability increased significantly. In '23, the sales volume of the company's commercial chicken seedlings was 267 million, +3.11%; revenue was 749 million yuan, +32.64%; the unit price of chicken seedlings was about 2.80 yuan/feather, +28.64%; gross margin was 2.48%, +16.20pct year on year. Currently, the company's commercial chicken seedlings production capacity exceeds 300 million birds. In terms of additional production capacity, the company's 800,000 chicken breeding project began supplying a small number of chicken seedlings to the market at 23H2; the construction of the 100 million commercial chicken surrogate incubation project has basically been completed, and trial operation will begin, and it may reach the scheduled state of use by the end of 24H1. With the release of the company's farming capacity, it may further drive the company's performance growth.
Cooked food production capacity continues to be unleashed, and online sales revenue has increased. In '23, the company sold 84,800 tons of chicken products, +18.25% year on year; achieved revenue of 1,115 billion yuan, +32.58% year on year; sales unit price was about 13,155 yuan/ton, +12.12% year on year; gross margin was 3.95%, +8.89pct year on year. The company's online sales channel is mainly cooked food. As the company continues to increase its online sales efforts, cooked food products have gained high brand popularity on e-commerce platforms such as Tmall and Douyin. In '23, the company achieved online revenue of 250 million yuan, a significant increase of 180.36% year on year; gross profit margin was 32.26%, +0.66 pct year on year. In terms of additional production capacity, the company's Weifang Cooked Food Factory has already put into operation 2 production lines and reached full production, and plans for the next 2 production lines have begun; Minhe Cooked Food Factory has installed 2 production lines and started operation. The two cooked food plants, Weifang and Minhe, have a total production capacity of about 60,000 tons. Currently, due to the early stages of operation, they focus on increasing production and building sales channels, and have not yet achieved profit; in the future, as the company's cooked food sales continue to grow, it is expected to contribute stable profits to the company.
Investment suggestions: The company has established a circular industry chain integrating broiler breeding, slaughter and processing, and organic waste development and utilization, with parent breeding as the core, and further developed the cooked food deep processing business to make up for weak links in the middle and downstream of the industry, so as to easily obtain value-added profits from all links in the value chain. As the popularity of the white chicken industry increases, the company is expected to turn a loss into a profit. We expect EPS to be 0.86 yuan and 1.57 yuan respectively in 2024-2025, corresponding to PE of 12 times and 7 times, maintaining the “recommended” rating.
Risk warning: risk of animal disease; risk of fluctuating raw material prices; risk of food safety; risk of fluctuating chicken prices, etc.