24Q1 profit or year-on-year decline, maintaining a “buy” rating
In 24Q1, the company's sales of chicken seedlings declined, and the company's profit declined year-on-year due to the high base effect. The scale of the company is expanding steadily. The company's net profit for 2024/25/26 is estimated to be 1,239/12.71/597 billion yuan, respectively, and the corresponding EPS is 1.12/1.15/0.54 yuan. Comparable companies agreed to expect 16 times PE in 2024. Considering that domestic production capacity of high-quality ancestral chicken breeders is still scarce, the price of probiotic Li Feng varieties is expected to remain high, and at the same time, there is a contraction in the supply of commercial chicken seedlings or a marked increase in prices, we gave Probiotic a profit of 18 times PE in 2024, corresponding to a target price of 20.16 yuan, maintaining a “buy” rating.
Chicken seedlings shrank and prices declined in March, and 24Q1 profits may decline year over year
In March, prebiotic white feather broiler seedlings recorded sales revenue of 182 million yuan, -47% year-on-year and -12% month-on-month. Among them, sales volume and sales price changes were -16% and -38%, respectively, and -2.2% and -10%, respectively.
Sales of commercial chicken seedlings declined year-on-year for 3 consecutive months, mainly due to factors such as adjustments to the company's production plans, etc., which reflected that the industry's supply of commercial chicken seedlings may have shrunk. In terms of price, we estimate that the price of chicken seedlings in March was about 30 to 35 yuan/set, a year-on-year decline and a month-on-month recovery; the commodity price was about 3.3 to 3.8 yuan/piece, a year-on-month decline. In 24Q1, the company sold 130 million chicken seedlings, -13% year over year, achieving sales revenue of 549 million yuan, -30% year over year, and sales unit price of about 4.21 yuan/piece, -19% year over year.
Among them, the price of chicken seedlings for parents may have declined month-on-month, while the price of commercial chicken seedlings may have declined year-on-year but increased month-on-month. We estimate that the price of parent and commercial chicken seedlings sold by the 24Q1 company is above the cost line, and the company's chicken seedlings profit is expected to reverse the month-on-month loss; however, due to the relatively high 23Q1 base, the 24Q1 company's chicken seedlings sales still shrank and declined year on year. We estimate that the company's chicken seedlings business profit or about 80 to 180 million yuan, compounded by a small loss in the pig farming business, and 24Q1 company's profit may decline year on year.
Lifeng and Yibeng 909 have excellent performance, and can be expected to continue to expand in scale
The white feather chicken seedlings currently sold by the company are the new product “Lifeng”, which has obvious competitive advantages in egg production rate, meat ratio, disease resistance, and survival rate. Currently, its parent's chicken seedlings account for about 20% and commercial chicken seedlings account for about 8%; at the same time, the “Probiotic 909” independently developed by the company is recognized by the market for its excellent production performance. Judging from the company's sales growth rate and product performance, we believe that the company's plan to sell a total of 1 billion birds in 2025 for commercial-generation broiler seedlings and probiotics in 909 is highly achievable, and the scale and market share can be expected to continue to increase.
The contraction in supply is expected to gradually materialize. The price of commercial surrogate seedlings may increase, and the number of domestic white feather broiler ancestral renewals decreased by 23% year-on-year in 2022. It has now spread to the generation of broiler breeding among birth parents. We expect that the current supply and demand gap for white feather broilers in 2024 is expected to drive the price of white feather chicken seedlings to enter a long cycle this year and next, or drive the price of the company's commercial chicken seedlings to rise. At the same time, the domestic ancestral renewal structure continues to deteriorate, and the company's breed advantage is expected to keep the price of chicken seedlings relatively high for their parents. The company's profit growth can be expected.
Risk warning: chicken price rise/cost falling short of expectations, sudden large-scale bird flu outbreaks, etc.