Incidents:
On March 19, 2024, Jingji Zhinong released its 2023 annual report: in 2023, the company achieved revenue of 12.417 billion yuan, an increase of 107.1% over the previous year, and realized net profit of 1,746 billion yuan, an increase of 125.89% over the previous year.
Investment highlights:
Revenue and profit both increased, and pig prices dragged down losses in the pig farming business. In 2023, the company achieved revenue of 12.417 billion yuan, an increase of 107.1% over the previous year, and realized net profit of 1,746 billion yuan, an increase of 125.89% over the previous year.
By business sector: (1) In 2023, the company sold a total of 1.845 million pigs, and the pig breeding business achieved sales revenue of 2.8 billion yuan, an increase of 23.82% over the previous year; however, due to the slump in pig prices throughout the year, the pig breeding business lost a total of 550 million yuan, such as excluding inventory impairment (about 55 million yuan), and operating losses of about 500 million yuan. (2) Due to a sharp increase in the number of commercial housing delivered by the company compared to the same period last year, the company's real estate business achieved sales revenue of 8.582 billion yuan, an increase of 216.98% over the previous year; net profit of 2,322 billion yuan. (3) The feed business achieved sales revenue of 923 million yuan, an increase of 4.16% over the previous year; in addition, the poultry farming business achieved sales revenue of 65 million yuan.
The pig breeding business is developing rapidly, and the cost reduction results are remarkable. According to the research records disclosed by the company on March 20, 2024, in January and February 2024, the average production cost of the company's fattening pigs was 14.50 yuan/kg (estimated full cost is about 15.7 yuan/kg), which is a significant decrease from the breeding cost of about 16 yuan/kg for the full year of 2023. Among them, the cost of weaned piglets in February 2024 was 352 yuan/head. By the end of February 2024, the company had about 114,600 sows, including about 99,000 basic sows and 15,600 reserve sows; 990,000 fattening pigs; and 157,000 nursing piglets.
Profit forecasts and investment ratings
The company's pig business is developing rapidly, and costs have dropped significantly in 2023. With the subsequent recovery in pig prices, the profit level of the company's main business is expected to continue to rise. We predict that in 2024-2026, the company's net profit to mother will be 9.66/15.82/787 million yuan, corresponding to PE 9.84/6.01/12.08 times, respectively. Covered for the first time, giving it a “buy” rating.
Risk warning
The risk of livestock diseases; the risk of fluctuations in raw material prices; the risk of inventory impairment; the risk of the company's performance not meeting expectations; the risk of liquidity in the secondary market; the risk of falling short of expectations in the real estate business, etc.