The company discloses its 2023 annual report. In 2023, the company achieved operating income of 4040.71 million yuan, a year-on-year increase of 1.83%, attributable net profit of 645.29 million yuan, 508.18% year-on-year, EPS of -1.28 yuan, weighted average ROE of -19.33%, a year-on-year decrease of 23.82 percentage points. Among them, 2023Q4 achieved operating income of 1034.85 million yuan, -28.73% year-on-year, and attributable net profit of 302.53 million yuan. Net profit attributable to 2023Q4 declined year-on-year and month-on-month (net profit attributable to 2022Q4 was 254.89 million yuan). At the end of 2023, the company's balance ratio was 59.85%. The company does not plan to distribute cash dividends or increase share capital from capital reserves in 2023.

The scale of the company's pig sales in 2023 continued to grow at a high rate. The company released 2.6737 million pigs in 2023, a year-on-year increase of 74.74%. Pig products achieved revenue of 3463.30 million yuan, an increase of 15.81% year-on-year, and a gross profit margin of -1.06%, a year-on-year decrease of 19.14 percentage points. In 2023, there was an oversupply of domestic pigs, and overall prices were relatively low throughout the year. The average annual profit levels of the self-raised and outsourced piglet breeding industries were -232 yuan/head and -261 yuan/head, respectively. Affected by low pig prices throughout the year, the company's pig breeding business lost money in 2023. At the same time, in accordance with the requirements of corporate accounting standards, the company calculated an impairment provision of 111.26 million yuan for various assets at the end of the period.

The company produced 680 million tons of feed in 2023, achieving operating income of 457.47 million yuan, -17.09% year-on-year, and a gross feed profit margin of 7.86%, a year-on-year decrease of 0.37 percentage points.

Investment advice

We expect the company's net profit for 2024-2026 to be $529/18.47/1,829 million yuan, respectively, and the corresponding EPS is 1.04/3.62/3.59 yuan. The current stock price corresponding to 2024 and 2025 PE is 35 times and 10 times, respectively, maintaining the “Increase in holdings - B” rating.

Risk warning: risk of livestock and poultry epidemics, risk of natural disasters, risk of rising raw material prices, risk of poor transportation.