Incidents:

The company released its 2023 annual report and achieved annual revenue of 8.578 billion yuan, a year-on-year decrease of 9.24%. Net profit to mother was a loss of 605 million yuan, a year-on-year decrease of 789.34%. The company's pig production has increased rapidly and costs have dropped a lot, but low pig prices have dragged down the company's performance losses.

Comment: Release is increasing, and costs are falling quarter by quarter

1) Release: The company sold 2.3027 million pigs in 2023, an increase of 91.13% over the previous year. 2) Costs: The company continues to improve breeding technology and strengthen management assessments, and the company's breeding costs are showing a continuous downward trend. The total cost of the company's farming at the end of '22 was 18 yuan/kg. We estimate that it had dropped to 16.4 yuan/kg in the fourth quarter of '23. 3) Price: The price of pigs is low. The average sales price of pigs in the company is only 15.04 yuan/kg throughout the year. 4) Profit: Costs continue to be higher than pig prices, and we estimate that the company's average loss is about 280 yuan.

The 24-year industry cycle has improved, and the company's listing continues to maintain a high level of growth. The company's performance in 24 years will benefit from the double impetus of rising pig prices and increased sales volume. First, pig production capacity has continued to decline since 23 years, and the Ministry of Agriculture's energy breeding data has been reduced by more than 10%. Industry supply and demand will improve markedly in 24, driving a moderate recovery in pig prices. Second, the company is mainly located in areas with high pig prices in Jiangsu, Zhejiang, and Shanghai, and the production capacity built by the company in the early stages is still in the release cycle. The target release target is 4 to 5 million heads in 24, and continues to maintain high growth.

Profit forecasting and investment ratings

The industry cycle is improving. At the same time, the company's listing volume is increasing, and the company's performance will improve markedly. We expect the company's 2024-2026 EPS to be 0.69 yuan, 2.34 yuan, and 1.54 yuan. According to the lower limit of the listing target, the current average market value of the company in 2024 is only about 3,300 yuan. The company's growth is outstanding, and the valuation is low, and we maintain a “buy” rating.

Risk warning:

There is a risk of an outbreak of the epidemic, and the price falls short of the expected risk.