Incident: On April 22, the company released its 2023 annual report, achieving annual revenue/net profit of 85.78/ -605 million yuan, or -9.24%/-789.34% year-on-year, with a basic EPS of -1.03 yuan. 23Q4 achieved revenue/net profit of 24.14/ -247 million yuan, -20.39%/-681.84% YoY.
Poor pig prices in '23 led to a loss in performance, and the number of pigs released continued to grow rapidly. Affected by the low average price of pigs in '23, the average price of the company's pigs sold throughout the year (monthly average) was 15.04 yuan/kg, which was lower than the full cost of pig breeding, leading to a loss in performance. The company released 230.27/622,900 pigs throughout the year/23Q4, +91.13%/+70.48%; achieved pig sales revenue of 39.86/1,133 billion yuan, +66.06%/+55.75%; sold 288 million heads/0 piglets, accounting for 12.51%/0% of pig sales. The company slaughtered 4.4817 million pigs in '23, +29.38% over the same period last year. Overall, the number of pigs released by the company continued to grow rapidly in '23, and the growth rate is good. The amount of slaughter is combined with the increase in sales volume to strengthen the brand effect of hot fresh meat.
The company's piglet sales ratio is reasonable, and the share of sales can be adjusted flexibly according to the price of piglets and pigs.
Driven by pig prices, gross margin declined markedly in '23, and the cost ratio increased slightly during the period. The company's gross margin in 2013/23Q4 was -0.38%/-2.02%, -6.64pct/-11.74pct year on year. The main reason was that pig prices fell significantly year on year in '23, and the company's breeding business lost money. The fee rate for the 23-year period was 6.32%, +1.34% year over year. All cost rates increased slightly due to the year-on-year decline in revenue, and the increase in expenses could not be diluted by revenue. Among them, the management expense ratio was 2.58%, +0.74pct year on year, due to a sharp increase in equity incentive expenses; the financial expense ratio was 2.17%, +0.26pct year on year, due to the increase in interest expenses. Asset impairment losses of 165 million yuan were recorded in 23 years, which dragged down overall performance. Asset impairment losses are mainly calculated in preparation for price declines, which include provisions for depreciation of 86 million yuan for expendable biological assets and 0.2 billion yuan for impairment of productive biological assets.
Investment advice: Considering the company's future increase in the proportion of pigs sold domestically, we lowered our revenue expectations. The company is expected to achieve net profit of 4.26/8.54/1.310 billion yuan in 24-26, respectively, of +170.5%/+100.2%/+53.5% year-on-year. Considering that the number of pigs released by the company is expected to continue to grow rapidly in the future, when combined, pig prices in Zhejiang Province have a certain premium advantage, maintaining a “buy” rating.
Risk warning: the amount of livestock and poultry released falls short of expectations, rising costs exceeding expectations, poor consumption, risk of epidemic diseases, etc.