Event: The company's 2023 revenue +10.89%, net profit to mother -7.31%; 2024Q1 revenue -0.80%, net profit to mother +111.00%. In 2023, the company achieved operating income of 116.117 billion yuan (+10.89%), net profit to mother of 2,741 billion yuan (-7.31% YoY); revenue for the fourth quarter of a single quarter was +13.32%, and net profit to mother was -42.77% YoY. In 2024Q1, the company achieved operating income of 23.172 billion yuan, -0.80% year-on-year; net profit to mother was 881 million yuan, +111.00% year-on-year. The company's gross margin for 2023/2023Q4/2024Q1 was -0.80pct/-2.25pct/+2.36pct to 8.47%/7.76%/10.75%, respectively.
The share and profitability of the company's feed business increased in 2023. 1) Due to the downturn in downstream farming, the feed industry will generally be under pressure in 2023; the company relied on product competitiveness, breeding technology service systems, etc., to achieve a contrarian increase in market share. In 2023, the company's feed revenue was 95.956 billion yuan, +13.03% year over year; sales volume was 24.4 million tons, +13% year over year, higher than the industry growth rate (+6.6%). 2) The company's foreign sales volume of fishery feed/poultry feed/pig feed was +2%/+13%/17% year-on-year to 524/1130/5.79 million tons, respectively, and sales volume in overseas regions was +24% to 1.17 million tons year-on-year. 3) Due to the increase in the share of special water and the reduction in feed raw material costs, etc., the gross margin of the company's feed in 2023 was 8.53%, +0.48pcts compared to the previous year. Since 2024, the pressure on raw material costs has eased (as of 2024Q1, fishmeal/soybean meal prices are -27.3%/-30.7% compared to the 2023 high), and feed performance is expected to continue to improve.
The pressure on the farming business will ease and wait for the cycle to reverse. 1) The number of pigs released by the company grew rapidly, reaching 4.6 million pigs in 2023, +44% over the same period; the company's pig breeding system gradually took shape, and the model of purchasing piglets fattening and hedging is running steadily, effectively controlling the scale of losses. According to Yongyi Consulting, the average price of 15 kg piglets in the second half of 2023 was about 387 yuan/head, or -44.6% compared with the same period last year. The company's 2024H1 breeding profit is expected to benefit. 2) Due to the continuous elimination of downstream inventories, fish prices in general water continued to be low in 2023. The company's aquaculture business achieved operating income of about 1.4 billion yuan and losses of more than 300 million yuan. The company is steadily promoting factory shrimp farming. With the gradual stabilization of fish prices, aquaculture is expected to develop steadily.
The company's seedlings and animal protection business is operating steadily. The company's seedling business continues to invest in shrimp breeding, nursery breeding, tilapia varieties, and traditional variety innovation. The number of new national aquatic products has increased to 6. In 2023, the company achieved operating income of about 1.3 billion yuan, of which shrimp fry revenue increased by about 29%; the overall animal insurance business was steady, achieving revenue of 1,095 billion yuan, an increase of 4.78% over the previous year.
Investment advice: We expect the company to achieve operating income of 1165.92/1327.29/149.662 billion yuan in 2024-2026, net profit to mother of 39.42/46.40/5.725 billion yuan, and PE corresponding to the closing price on April 22 is 20.58/17.48/14.17 times, respectively, maintaining the “increase” rating.
Risk warning: Extreme weather has reduced sales; raw material prices have fluctuated greatly; competition in the feed industry has intensified