High growth costs have declined steadily. In the cycle reversal phase, high-quality companies released their 2023 annual reports. In 2023, they achieved revenue of 8.578 billion yuan (-9.24%), net profit to mother of 605 million yuan (-789.34%), revenue of 2,414 billion yuan (-20.39%) in a single Q4, and net profit of 247 million yuan (-681.84%). Along with the gradual reversal of the pig cycle in the second half of 2024, the company's cost decline performance is expected to improve. Given the intensity of the 2024 cycle reversal or higher than previous expectations, we raised the company's 2024 profit forecast, lowered the profit forecast for 2025, and added the 2026 profit forecast. The company's net profit for 2024-2026 is 11.12/18.83/15.51 (the original forecast for 2024-2025 was 7.39/22.56 billion yuan, respectively). The corresponding EPS is 1.80/3.04/2.51, respectively Yuan. The current stock price corresponds to PE 11.9/7.0/8.5 times. The company's listing costs have declined steadily, maintaining a “buy” rating as a high-quality target during the cycle reversal phase.
The company's listing costs have declined steadily. Expanding the stocking model and continuing to grow with light assets, the company achieved 2.3027 million pigs released in 2023 (+91.13%, of which piglets account for 13%). The average price of pigs released was about 15.0 yuan/kg, and the full annual cost was about 17.2 yuan/kg (of which 2023Q4 dropped to 16.4 yuan/kg). By the end of March 2024, the company's ability to reproduce was close to 150,000 heads and continued to grow. The company's sales have maintained high growth. It is estimated that 4 million pigs will be released in 2024 (+73.71%, of which piglets account for 20% to 30%), and the full cost for the whole year will drop to 16 yuan/kg (already reduced to 16.2 yuan/kg in March 2024).
In terms of production performance, the company's PSY reached 25, and the overall survival rate was 88% +. It is expected that by the end of 2024, the high-breeding French population will account for 40%-50%, and PSY will rise to 26. The company started with building farming and is currently actively expanding the asset-light farming model. As of March 2023, the company's breeding model has kept more than 100,000 pigs.
The company's slaughter business grew steadily and developed steadily. With sufficient capital, safe and worry-free pig slaughter volume of 4.4817 million heads in 2023 (+29.38%), the average net profit of slaughter was about 33 yuan. The company's rich slaughter experience and steady expansion continued to contribute to profits and cash flow. At the end of 2023, the company's pig slaughter capacity was about 12 million heads. It is estimated that 6 million pigs will be slaughtered in 2024. The slaughter capacity utilization rate continues to increase, and the profit scale is expected to continue to expand. On the financial side, the company has a monetary capital of 628 million yuan. The capital is sufficient, safe and worry-free. In the future, the balance ratio can be further reduced through multiple financing channels.
Risk warning: the risk of animal diseases, the risk of abnormal fluctuations in pig prices, company listing and cost reductions falling short of expectations.