24Q1 frozen products dragged down profit year-on-year, maintaining the “buy” rating of Shuanghui Development and released a quarterly report. In 2024, Q1 achieved revenue of 14.308 billion yuan (yoy -8.92%, qoq +4.04%), and net profit of 1,272 billion yuan (yoy -14.54%, qoq +75.28%). We expect the company's net profit to be 53.39/57.10/6.118 billion yuan for 2024/25/26, respectively, and the corresponding EPS is 1.54/1.65/1.77 yuan, respectively. Referring to the 24-year comparable company Wind's average expectations of 17X PE, considering the steady increase in the scale of the company's slaughter, 24H2, which is expected to contribute to some profit flexibility if pig prices recover, and the meat product structure continues to be optimized, we will give the company 20 times PE in 24 years, with a target price of 30.8 yuan, maintaining the “buy” rating.
Revenue from meat products increased and sales declined 24Q1. The company's total meat sales volume fell 24Q1. The company's total meat sales volume was 780,000 tons, -4.4% year over year. Prices may have decreased slightly due to market demand and market fluctuations and increased industry competition, leading to a year-on-year decline in the company's revenue; benefiting from product structure optimization and meat cost improvements, the average gross margin increased 2.13 pcts to 19% year over year. The year-on-year decline in net profit to mother was slightly larger than revenue. It was mainly affected by the 23Q1 headquarters having concentrated interest on large deposit statements, increased interest income of about 100 million yuan, 24Q1 interest income decreased by about 90 million yuan year on year, and income tax expenses increased by about 27.44 million yuan due to income restructuring. Looking at the split business, 1) the profit of the fresh frozen products business may have declined significantly. Among them, profit declined a lot due to the relatively stable profit of fresh products, high base effect, weak market, and pressure on frozen products; 2) The meat products business tonnage profit increased but sales declined. 24Q1's meat product tonnage profit increased by about 5,000 yuan/ton, up about 22% year on year, the highest in a single quarter of the year, mainly due to effective cost control, product structure optimization, etc., but sales declined somewhat this year due to the high base of the same period last year + weak market; 3) Breeding and other businesses, raising chickens may increase losses or raise year-on-year Pig business results may have improved year over year.
It is expected to return to the growth channel throughout the year, and the high dividend policy will continue
Looking ahead to 2024, the company expects to achieve revenue and profit growth through increased sales volume and cost improvements throughout the year. Among them, the meat products business is expected to achieve a double increase in profit through “restructuring, price adjustment, and cost control” and “promotion of new products in the new area”, and the profit increase may be more obvious; the fresh frozen products business may continue to grow on a large scale to seek stable profits; and the farming business may reduce drag through continuous improvement of production indicators. At the same time, the company still has a high dividend value. The 2023 annual equity distribution plan is 0.7 yuan per share, combined with a mid-term payout of 0.75 yuan per share, with an annual dividend rate of 99%.
Target price is 30.8 yuan, maintaining the “buy” rating
We expect the company's net profit to be 53.39/57.10/6.118 billion yuan in 2024/25/26, respectively, with a corresponding EPS of 1.54/1.65/1.77 yuan, and a target price of 30.8 yuan, respectively, to maintain the “buy” rating.
Risk warning: pig epidemic risk, food safety risk, meat product sales falling short of expectations, slaughter volume falling short of expectations, risk of large fluctuations in pig prices, increased competition in the meat products industry.