The cost control industry is leading, with high growth and continuous growth. It maintains the publication of the 2023 annual report by the “Buy” rating company. In 2023, it achieved revenue of 4,041 billion yuan, yoy +1.83%, net profit to mother - 645 million yuan, yoy -508.18%. Q4 achieved revenue of 1,035 million yuan, YOY -28.73%, net profit to mother of 303 million yuan, and YOY -218.69%. In 2024, the impact of degeneration was gradually transmitted to the pork side. Along with the gradual reversal of the pig cycle in the second half of 2024, the company's costs continued to decline, and performance is expected to improve significantly. We raised the company's profit forecast for 2024-2025 and added a profit forecast for 2026. The company's net profit for 2024-2026 is 10.94/34.27/21.21, respectively (the original forecast for 2024-2025 was 919/2,638 million yuan, respectively). The corresponding EPS was 2.15/6.72/4.16 yuan, respectively. The current stock price corresponds to PE 16.9/5.4/8.7 times. The company leads the cost control industry, continues to grow with high sales growth, and maintains a “buy” rating.
Excellent breeding performance, and costs continued to decline. The release of pigs maintained high growth. In 2023, the company's pig business achieved revenue of 3.463 billion yuan, yoy +15.81%, and net profit of -51 million yuan.
There were 2.6737 million pigs per year, yoy +74.74%, of which 1.8 million commercial pigs/piglets were listed respectively.
In 2023, the total cost of the company's pigs was 15.9 yuan/kg (year-on-year -0.7 yuan/kg), and the average sales price of pigs was 14.4 yuan/kg. In terms of production performance, PSY remained at 27-28 in 2023; meat material dropped to 2.6 (2.89 in 2022), and is expected to drop to 2.5 in 2024; pig release rate is about 89% in 2023 (85% in 2022), and is expected to reach 94% in 2024. The company continues to promote cost reduction and efficiency, and rapidly expand with light assets. By the end of February 2023, the company was able to store 110,000 heads and 70,000 backup stocks. The construction of the Dechang project has been completed. It is expected to be introduced and put into operation at the end of March. The company's sow production capacity is expected to reach 24-280,000 heads by the end of the year. We expect the total cost of the company's pigs to be reduced to less than 14.8 yuan/kg in 2024, with 3.5 million pigs released, yoy +31%.
The poultry business shut down the steady operation of the leather business, and the company has sufficient capital to expand the worry-free poultry business: in 2023, it achieved revenue of 0.26 million yuan, and commercial chicken sales volume was 788 million birds, yoy -73.89%. The poultry business was shut down during the reporting period, and the remaining stocks were cleared ahead of schedule, leading to a decline in revenue and gross margin. Leather business: Achieved revenue of 86 million yuan in 2023, sales volume of 5.3959 million square feet, yoy -76.34%. The leather business actively develops customers, optimizes product structure, and operates steadily. Financial aspects: At the end of 2023, the company's balance ratio was 59.85%, the monetary capital was 446 million yuan, and funds such as unused loans had already been approved reached 600 million yuan. The capital was abundant and the expansion was worry-free.
Risk warning: pig prices fluctuate greatly, the risk of animal diseases, and the decline in company costs falls short of expectations.