Sluggish pig prices affected feed demand and rising costs, and the 23-year performance fell 30% year over year. The company released its annual report for the year 23 and the quarterly report for '24, and achieved operating income of 1.65 billion yuan, yoy -0.7%, net profit of 83.89 million yuan, yoy -30%; 24Q1 operating income of 410 million yuan, yoy +6%, net profit to mother of 20.33 million yuan, yoy -13%. The decline in performance in 23 and 24Q1 was mainly due to depreciation and amortization of fund-raising projects, increased marketing expenses, and accrued credit impairment losses.
Feed sales reached an inflection point in 24Q1, and low capacity utilization affected single-ton profits. Feed sales in '23 were about 400,000 tons, yoy +2%, operating income of 1.56 billion yuan, yoy -3%, gross profit margin of 13.6%, down 0.32pct year on year; Q1 piglet prices rose, boosting the inflection point of pig demand. 24Q1 main revenue increased 6% year on year. Considering the 11%-15% year-on-year drop in Q1 pig price, feed sales are estimated to increase by about 20% year on year. Short-term profit per ton is affected by rising depreciation costs and increased amortization of production capacity.
The recovery in pig farming profits boosted the rise in demand for pig feed, and demand for front-end materials took the lead in reaching an inflection point. Pig production capacity has continued to decline since 23, and the gap between supply and demand is expected to appear in 24 years. The rise in pig prices and the recovery in breeding profits will drive the first recovery in demand for front-end materials. The company's product structure focusing on pig front-end materials will fully benefit. The commissioning of the fund-raising project compounded the recovery in demand for pig feed, and the company's sales growth was clearly elastic.
It is proposed to implement an equity incentive plan to fully investigate employee enthusiasm. The company announced an equity incentive plan. It plans to grant 10.78 million shares of stock options, accounting for about 6.4% of the total share capital, with an exercise price of 12.85 yuan/share. For the first time, a total of 155 people (directors, supervisors, and core technical personnel) were awarded. According to the execution conditions, the compound growth rate of revenue and net profit attributable to mother in 23-26 was not less than 6.3% and 4.5%, respectively.
Profit forecasting and investment advice. The estimated net profit for 24-26 will be 1.53, 1.77, and 208 million yuan, respectively, and EPS will be 0.91, 1.05, and 1.24 yuan/share, respectively. The company's profitability is leading the industry. The industry boom has recovered and superimposed fund-raising projects have been put into operation, and feed volume has increased significantly. The company was given a 24-year valuation of 20XPE, a reasonable value of 18.2 yuan/share, and maintained a “buy” rating.
Risk warning: risk of fluctuations in raw material prices, risk of fluctuations in pig prices, risk of animal diseases.