Event: On March 22, the company released its annual report for the year 23. The company achieved annual revenue/net profit of 40.41/-645 million yuan, +1.83%/-508.18% year-on-year, respectively. The basic EPS was -1.27 yuan. In 23Q4, we achieved revenue/net profit of 1,035/ -303 million yuan, or -28.73%/-218.69% year-on-year, respectively.
In '23, pig prices were sluggish throughout the year, dragging down the company's performance. Pig prices were sluggish throughout the year in '23, and the characteristics of the poor peak season in the second half of the year were obvious. The average spot price for the whole year was only 15.08 yuan/kg, which was lower than the full cost of the company's pig production, leading to a loss in annual performance. In 23 years, the company continued to improve breeding efficiency, and the cost dropped significantly. The average operating cost of raw pigs (including fattening pigs, piglets, and breeding pigs) was 1,309 yuan, -18.24% over the same period last year. However, the average sales price of pigs was 1,295 yuan, which was lower than operating costs, leading to a slight loss in the pig sector. Prices of feed ingredients such as corn and soybean meal declined year on year in 24, and superposition management efficiency improved, and there is still room for cost reduction in the pig business. In '23, the company's various assets were prepared for impairment of 111 million yuan, mainly profits and losses from the disposal of productive biological assets.
The number of pigs released increased year-on-year in '23, and is expected to maintain a high growth rate in '24. In '23, the company released 2.6737 million pigs, +74.74% over the same period last year. The Dechang project will gradually be put into operation in '24, and the company's production capacity still has good potential for expansion. It is expected that the number of sows that can reproduce in 24 years will increase significantly from the end of 23.
The slump in pig prices affected gross profit margins, and the cost ratio increased slightly during the period. The gross margin of the 23Q4 company was -0.37%/0.01%, -14.97pct/-28.67pct year on year. The reason was that low pig prices affected the gross profit margin for the whole year, and the peak season for 23Q4 pig prices was not strong, leading to a sharp decline in 23Q4 gross margin year over year. The cost rate for the 23/23Q4 period was 9.59%/12.93%, +0.29pct/+2.54 pct year-on-year. Among them, the sales expense ratio was 0.96%/0.96%, -0.14pct/+0.06pct, due to a reduction in transportation and travel expenses, business hospitality expenses, etc.; the management expense ratio was 5.36%/7.87%, and -0.39pct/ -0.37pct year over year due to no excessive incentive fees; and the financial expense ratio was 2.66%/3.04%, +0.58%/+1.76% year-on-year, due to increased interest expenses on bank loans.
Investment advice: The estimated net profit for 2024-2026 will be 840/15.97/1,2005 million yuan, +230.2%/+90.1%/-24.5% year-on-year, corresponding PE 22.0/11.6/15.4 times. In the future, the number of pigs released by the company will continue to grow rapidly, there is still room for cost reduction, medium- to long-term growth is good, and the “buy” rating will be maintained.
Risk warning: the amount of livestock and poultry released falls short of expectations, rising costs exceeding expectations, poor consumption, risk of epidemic diseases, etc.