In 2023, the company achieved operating income of 4,041 billion yuan, net profit to mother - 645 million yuan. The company announced the 2023 annual report: in 2023, the company achieved operating income of 4,041 billion yuan, up 1.8% year on year, and net profit to mother - 645 million yuan. The results turned losses year on year, mainly due to the continued slump in pig prices in 2023 combined with a significant increase in the company's listing volume. At the end of the period, the company accrued asset impairment reserves of 111 million yuan, mainly including preparation for falling inventory prices, impairment of goodwill, and asset disposal losses caused by the shutdown of the poultry business, of which 45.2197 million yuan was prepared for impairment of expendable biological assets.
The number of pigs released is growing rapidly, and breeding performance continues to be optimized
In 2023, the company's pig business achieved revenue of 3.463 billion yuan, an increase of 15.8% over the previous year, and the number of pigs released was 26.74 million, an increase of 74.7% over the previous year. Affected by the continued slump in pig prices, the company's pig breeding business fell into loss. Taking into account asset impairment, we estimate that the company's pig breeding sector lost about 500 million yuan in 2023. The company's Dechang Superstar pig breeding integration project is expected to be gradually put into operation in the first half of 2024. The company will rationally adjust the pace of production capacity according to changes in the prices of fattening pigs and piglets, and steadily advance the medium- to long-term launch goals.
In terms of breeding costs, the company has begun to improve the level of production management, reduce breeding costs, and promote a continuous reduction in total costs through improvements in breeding performance. According to our estimates, the company's fat pig production cost in 2023 was about 14.68 yuan/kg, and the total cost was less than 16 yuan/kg, and the cost advantage continued to show. By the end of 2023, the company's balance ratio was 59.85%, and the level of leverage increased month-on-month but still below the industry average.
Focusing on the main pig breeding business, the leather business is under pressure.
In 2023, the company's feed business achieved revenue of 457 million yuan, a year-on-year decrease of 17.1%, feed production of 68,000 tons, and export sales of 96,800 tons. In terms of leather business, due to poor demand in the downstream market, the company's leather business achieved revenue of 86 million yuan, a year-on-year decrease of 71.7%. In 2023, the company's poultry business achieved revenue of 0.26 million yuan, a year-on-year decrease of 77.4%. This was mainly due to the company's focus on pig breeding, the shutdown of the poultry business, and a decrease in commercial chicken sales.
Investment advice
Superstar Agriculture and Animal Husbandry is a high-quality breeding enterprise in southwest China. It has the advantage of volume growth and breeding cost. Taking into account changes in pig prices and the company's listing plan, we expect the company to achieve operating income of 6.48 billion yuan, 12.213 billion yuan, and 14.196 billion yuan in 2024-2026 (pre-forecast value of 8.996 billion yuan and 11.968 billion yuan), with year-on-year growth of 60.4%, 88.5%, and 16.2% (pre-forecast values for 2024-2025 were 76.0% and 33.0%). The corresponding net profit attributable to mother was 511 million yuan, 2.02 billion yuan, and 1,391 billion yuan (the value before 2024-2025 forecast was 969 million yuan and 1,356 million yuan), and the corresponding EPS was 1.00 yuan, 4.32 yuan, and 2.73 yuan, respectively, maintaining the “buy” rating.
Risk warning
Risk of price fluctuation of livestock and poultry products; risk of price fluctuation of raw materials; risk of rising costs; risk of production capacity expansion falling short of expectations, etc.