Incidents:
On April 17, 2024, Yisheng Co., Ltd. released its 2024 quarterly report: in the first quarter of 2024, the company achieved revenue of 687 million yuan, a year-on-year decrease of 24.75%; net profit to mother was 109 million yuan, or -65.16% year-on-year.
Investment highlights:
The price of 2024Q1 chicken seedlings fell year-on-year, and revenue and profit declined year-on-year, ending losses month-on-month. In Q1 2024, the company achieved revenue of 687 million yuan, a year-on-year decrease of 24.75%; realized net profit of 109 million yuan, -65.16% year-on-year, reversing losses from month to month (2023Q4 net profit loss of 143 million yuan). In Q1 2024, due to the year-on-year decline in the price of chicken seedlings, but the month-on-month improvement, industry sentiment increased. According to the company's publicly disclosed investor research minutes (2024/1/22), it will take at least 14 months for the price trend of commercial chicken seedlings to be transmitted from ancestral breeding to commercial chicken seedlings. Also, considering the impact of peak egg production and incubation period, the decrease in ancestral breeding will mainly affect the production of commercial chicken seedlings this year. The company expects this year's commercial-generation chicken seedlings market to be better than last year.
Production capacity for breeding pigs was gradually released, and the two-wheel drive for pigs and chickens moved forward steadily. In 2023, the company completed issuing shares to specific targets. The total amount of capital raised was 1.16 billion yuan. In addition to supplementing the company's working capital, the raised capital was mainly used for pig breeding and chicken breeding hatchery projects. With the gradual use of fund-raising projects, the company's breeding pig production will increase dramatically in 2024, and the company is steadily moving towards the strategic goal of breeding chickens and breeding pigs.
The profit forecast and the price of investment-rated chicken seedlings rose month-on-month in Q1 of 2024. We adjusted the 2024-2026 company's revenue to 35.25/36.04/4,028 billion yuan, and net profit to mother of 9.55/ 8.15/1,093 million yuan, corresponding to PE 11/13/10 times, respectively. As a seed source company, the company first benefited from rising chicken seedlings prices and maintained a “buy” rating.
Risks indicate the risk of poultry outbreaks; the risk of fluctuations in raw material prices; the risk of the business model; the risk of the company's performance expectations not meeting standards; and the risk of product price fluctuations.