The company lost 1,203 billion yuan in net profit to the mother in 2023. Due to low pig prices, the performance loss increased further compared to the same period last year. The company achieved operating income of 5.632 billion yuan in 2023, an increase of 12.52% over the previous year, and a net profit loss attributable to mother of 1,203 billion yuan, an increase in losses over the previous year, of which asset impairment losses reached 222 million yuan.

Looking at the fourth quarter of a year, 2023Q4 achieved revenue of 1,758 billion yuan, a year-on-year decrease of 0.81%, and a net profit loss of 454 million yuan to mother, increasing losses year-on-year and month-on-month, with asset impairment losses of 108 million yuan.

Judging from the sales performance of the segment business, in 2023, the company achieved 3.2 million pigs, an increase of 75%; feed production volume was 613,700 tons, an increase of 120% year on year; slaughtered meat production was 61,800 tons, an increase of 20% year on year, and the company's various business scales maintained steady growth.

The scale of the company's productive biological assets is growing steadily, and the release of pigs is expected to continue to increase. The actual controller of the company is the Hunan Provincial State-owned Assets Administration Commission, which acquired 100% of the shares of Tianxin Breeding, a high-quality breeding pig and piglet sales company in Hunan Province in 2022 to further enhance its breeding strength. By the end of 2023, the company had 349,200 heads of livestock at the end of the breeding period, an increase of 20.5% over the beginning of the year. Of these, 209,900 sows could be raised and 139,300 were unmature and productive biological assets. It is expected that the company's pig production will continue to grow steadily in the future. In addition, according to the “Performance Commitment and Compensation Agreement” signed by the company when it acquired Tianxin Seeds, Tianxin Seed's cumulative realized net profit as of the end of 2023 accounted for 89.97% of the cumulative promised net profit. The original shareholders of Tianxin Seed Industry are required to fulfill compensation obligations. The compensation amount is 83.9707 million yuan, which is equivalent to 11.6303 million shares. The listed company will buy back the shares and cancel them.

There is plenty of room for cost improvement, and capital reserves are sufficient. In terms of cost, the company is currently at the midstream level of the industry, and there is plenty of room for future cost improvement. On the one hand, the company plans to continuously optimize the efficiency of the pig breeding group through the introduction of French pigs. On the other hand, it is expected that as the company's capacity utilization rate increases, headquarters expenses will be further amortized. In terms of capital, by the end of 2023, the company had monetary capital of 1.5 billion yuan, an increase of 165% over the previous year; the balance ratio reached 74.99%, an increase of 3.81 pcts over the same period last year, and is at the midstream level of the industry. Furthermore, by the end of 2023, the company's productive biological assets reached 951 million yuan, up 13% year on year; fixed assets reached 1.704 billion yuan, up 30% year on year; and projects under construction reached 335 million yuan, a decrease of 40% year on year. It is expected that the company's production capacity will continue to increase in the future.

Risk warning: An uncontrollable outbreak occurred during the farming process, and the sharp rise in food prices increased feed costs.

Investment advice: Maintain a “buy.” Since last year, the production capacity of the pig industry has been greatly reduced. It is expected that pig prices will rise significantly in the second half of 2024. Furthermore, the price of feed raw materials has dropped significantly since this year, and the company's breeding costs are expected to benefit. We raised our previous profit forecast for the company's 2024. The net profit for 2024-2026 is 1.5/79/ 82 billion yuan (originally estimated net profit for 2024-2025 was -40/2.02 billion yuan), EPS was 0.12/0.63/0.65, and PE was 69/13/13 X.