Core views
The average domestic pig price in the first quarter of 2024 was 14.46 yuan/kg, down 3.79% from the first quarter of 2023. Affected by the fall in pig prices, the company's revenue side declined slightly in the current period, but the decline narrowed to a certain extent. Currently, the overall external consumption environment is showing a continuous recovery trend, which has led to a recovery in a range of business formats, including restaurants, and is also conducive to boosting consumer demand for meat products. It is expected that pig prices will be low and high in 2024. The company maintains sufficient frozen meat reserves and has a lower cost advantage. It is expected that profit elasticity will be released as pig prices recover in the second half of the year. The company's dividend rate for the full year of 2023 is close to 100%, corresponding to the current market capitalization dividend rate of 5.2%, with a certain margin of safety.
occurrences
The company released its 2024 quarterly report
The company achieved operating income of 14.308 billion yuan in the first quarter of 2024, a year-on-year decrease of 8.92%, net profit to mother of 1,272 billion yuan, a year-on-year decrease of 14.54%, and net profit after deducting non-return to mother of 1,245 billion yuan, a year-on-year decrease of 11.12%.
Brief review
Sales have declined slightly, and pressure on the pig price base has weakened
According to data from the National Bureau of Statistics, the average domestic pig price in the first quarter of 2024 was 14.46 yuan/kg, down 3.79% from the first quarter of 2023. Affected by the fall in pig prices, the company's revenue side declined slightly in the current period, but the decline narrowed to a certain extent from month to month. In terms of sales, in the first quarter of 2024, the company's total export sales volume of meat products was 789,900 tons, a year-on-year decrease of 4.43%.
Performance is improving quarter by quarter, and H2 is expected to release elasticity
The company's profit level improved quarterly. The 24Q1 gross profit margin was 19.6%, up 2.12pcts year-on-year.
The sales expense ratio and management expense ratio were 3.39%/2.19% respectively, up 0.29/0.43 pcts year-on-year. Currently, the overall external consumption environment is showing a continuous recovery trend, which has led to a recovery in a range of business formats, including restaurants, and is also conducive to boosting consumer demand for meat products. It is expected that pig prices will be low and high in 24 years. The company maintains sufficient frozen meat reserves and has a lower cost advantage. It is expected that profit elasticity will be released as pig prices recover in the second half of the year.
Continue to promote the layout of prepared dishes, and the dividend ratio highlights the margin of safety
The company adheres to the idea of “careful design, careful launch, focus on leadership, and continuous promotion”, strengthens the development and promotion of new products, and continues to cultivate a number of new products with potential for growth. The new products that have performed well include smoked sausage, authentic sausage, Jinma reduced salt ham sausage, and bursting cheese sausage. On the product side, the company is currently launching prepared food products such as braised meat, braised pork with sauce, cooked food with sauce, fresh preparation, and convenient fast food, etc., and will continue to strengthen new product research and development, such as braised pork, braised pork with plum sauce, braised chicken nuggets, potato and beef, Shuanghui Jintang Bazhen, and Shuanghui Eight Bowls. At present, the company has set up a professional team to strengthen research and development of prepared food products for different regions, different groups of people, and different consumption scenarios, etc., to meet diversified consumer needs, and will focus on cultivating and promoting key products to promote the rapid development of the company's prepared food business. In terms of production capacity planning, the company is actively promoting the construction of Shuanghui Third Industrial Park and improving the production capacity layout for prepared dishes. In '23, the company plans to distribute a cash dividend of 2.43 billion yuan, compounded by mid-term dividends of about 5.02 billion yuan for the whole year. The dividend rate is close to 100%, corresponding to the current market capitalization dividend rate of 5.2%, which has a certain margin of safety.
Profit forecast: We expect revenue for 2024-2026 to be 657.8 billion yuan, 702.0, and 74.33 billion yuan, respectively, up 9.8%, 6.7%, and 5.9% year on year. We expect net profit to mother of 58.5, 62.3, and 6.57 billion yuan, up 15.8%, 6.5% year on year. EPS for 2024-2026 was 1.69, 1.80, 1.90 yuan, corresponding to PE valuations of 16X, 15X, and 14X, maintaining a “buy” rating.
Risk warning:
1. Food safety risks: There may be certain food safety risks in the company's procurement, production and distribution processes, and the company cannot fully control it. If there are problems in the process leading to food safety risks, it will adversely affect the normal operation of the company, thereby affecting the company's performance.
2. Risk of large fluctuations in the price of raw materials such as pork: The price of raw materials required for the company's production is affected by factors such as supply and demand in the market. If the price of raw materials rises sharply, it may put pressure on the company's production and operation costs.
3. Market competition risk: The market competition pattern in the meat industry is complicated. If competition among large enterprises intensifies, it will put pressure on the company's operations.