Core views:
Low pig prices dragged down 24Q1 performance, which was basically in line with market expectations. The company released its annual report for the year 23 and the quarterly report for '24. In '23, the company achieved revenue of 110.861 billion yuan (yoy -11.2%); net profit to mother was -4263 billion yuan (yoy -132.1%); net profit after deduction was -4 billion yuan (yoy -130.9%). Factors such as year-on-year decline in pig prices and asset impairment (about 200 million yuan) led to loss of performance. In 24Q1, the company's revenue was 26.272 billion yuan (yoy +8.6%); net profit to mother was -2379 billion yuan (yoy -98.6%); net profit after deduction was -2387 billion yuan (yoy -90.6%). Factors such as low pig prices in the first quarter and costs affected by seasonal epidemics dragged down the company's performance.
As of 24Q1, the company's balance ratio was 63.59%, up 1.48 percentage points from month to month.
Production increased steadily in the first quarter, and farming costs are expected to continue to decline. In 23 years, the company sold a total of 63.816 million pigs (yoy+ 4.27%); of these, the number of commercial piglets/piglets/breeders released was 6226.7/136.7/1.81 million, respectively; the total cost of pigs for the whole year was about 15 yuan/kg, down 0.7 yuan/kg from '22, and the breeding cost advantage was obvious. The 24Q1 company has sold a total of 1.61 million pigs (yoy +15.64%); it is estimated that 24Q1 heads lost about 150-170 yuan/head. Costs are rising due to frequent cases of swine diseases in winter. The company continues to reduce costs and increase efficiency, and there is still room for future breeding costs.
The number of sows kept continues to grow, and the downstream slaughter business is steadily being promoted. The company's sow production capacity continued to grow. As of 24Q1, the number of sows that could be raised reached 3.142 million, an increase of about 13,000 heads at the end of 23; the balance of productive biological assets was 10.64 billion yuan, an increase of 43.9% over the previous year, effectively supporting future production growth. The number of sows released is expected to reach 66-72 million in 24 years. In addition, the company continues to improve the slaughter business layout and actively expand downstream sales channels. By the end of '23, slaughter production capacity had reached 29 million heads/year, and the capacity utilization rate had increased to 46%.
Profit forecasting and investment advice. We expect the company's net profit to be 122.99, 220.90, and 27.461 billion yuan respectively in 2024-26, corresponding EPS of 2.38, 4.04, and 5.02 yuan/share, respectively, maintaining a reasonable value of 50.06 yuan/share, maintaining a “buy” rating.
Risk warning. Risk of fluctuations in pig prices, risk of fluctuations in raw material prices, risk of epidemic diseases, food safety, etc.