In 2023, it achieved net profit of 386 million yuan (year-on-year loss reduction), maintained the “purchase” rating of Minhe shares published an annual report, and achieved revenue of 2,074 million yuan (yoy +29%) and net profit to mother of 386 million yuan (yoy +15%) in 2023; of these, Q4 achieved revenue of 442 million yuan (yoy -16%, qoq -14%) and net profit to mother of 268 million yuan (yoy -123%, qoq -243%). Considering the recovery in production capacity of our ancestors in 2023, we lowered our 2024/25 profit forecast and added a profit forecast for 2024/25/26. We expect net profit to be 2.07/3.85/183 million yuan, corresponding EPS of 0.59/1.10/0.53 yuan. Referring to the 2024 Wind, a comparable company unanimously expects an average PE value of 14x. Considering that the company's newly built production capacity is released one after another, the chicken seedlings sales volume is expected to continue to grow and the prepared products business or gradually expand. This is expected to lead to an upward reversal in the company's profitability, giving the company 21x PE in 2024 with a target price of 12.39 yuan, maintaining a “buy” rating.
The price cost of chicken seedlings in 23Q4 is under pressure. In 2023, the company's sales revenue for cooked chicken and chicken products was about 7.49 billion yuan and 1,115 billion yuan respectively, respectively, and the year-on-year growth rate was 33%, mainly due to the increase in the price of white feather chicken seedlings combined with an increase in sales of prepared chicken products.
In 2023, the company sold 267 million white feather broiler seedlings, +3% year over year, and sales price was about 2.8 yuan/piece, and we estimated a single loss of about 1 to 1.5 yuan/piece; sales volume of chicken products was 88,800 tons, +18% year over year, and sales unit price was about 132,000 yuan/ton, +12% year over year. We analyzed the sharp rise in volume price or the increase in the company's prepared product sales. At the same time, the price of prepared products was relatively high. 23Q4 The decline in the company's revenue and the increase in net profit and loss due to the decline in the price of chicken seedlings and the increase in costs were mainly brought about by the decline in the price of chicken seedlings. The 23Q4 company sold 61.51 million chicken seedlings, +3% year over year, with an average sales price of about 1.81 yuan/piece, 41% year over year. At the same time, the cost of chicken seedlings increased due to the increase in the purchase price of chicken for parents. In 2023, the purchase amount of chicken seedlings for parents was about 187 million yuan, +123% year over year. We estimate that chicken seedlings alone lost about 2.5 to 3.5 yuan/piece.
Expand the main business, chicken seedlings, and extend downstream food
The additional 100 million birds/year commercial chick production capacity and 30,000 tons of cooked food projects raised in 2021 are expected to be put into operation in mid-2024. In 2023, the volume of prepared products was obvious. Weifang Minhe's production capacity of 30,000 tons was already at full capacity. The online channel for chicken products (mainly sales of prepared products) achieved revenue of 250 million yuan, +180% year-on-year, and a gross profit margin of 32%, driving the company's overall sales revenue for chicken products to increase markedly, and gross profit changed from loss to profit. At the same time, in terms of food sales channels, Minhe set up the Sun Company Hangzhou Minyuehe in Hangzhou to specialize in selling cooked food on e-commerce platforms. Currently, they have stores on Tmall and Douyin, and the sales momentum is good. In terms of products, products such as pistol legs pioneered by the company were quite successful, and continued to launch promising models such as Tomahawk chicken legs.
The contraction in supply is expected to gradually materialize. Commercial surrogate broiler prices may decrease 23% year-on-year in 2022. We expect the current supply and demand gap in 2024 to reverse the upward trend in the price of white feather chicken seedlings, usher in a long cycle this year and next two years, or drive the price of the company's commercial chicken seedlings to rise. The company's profit growth can be expected.
Risk warning: chicken price rise/cost falling short of expectations, sudden large-scale bird flu outbreaks, etc.