Incident: The company disclosed its 2023 annual report. The company achieved total revenue of 33.39 billion yuan, an increase of 3.07% over the previous year; net profit loss to mother was 2.174 billion yuan, which changed from profit to loss (profit of 55.6 million yuan for the same period last year).
Among them, revenue for the fourth quarter of 2023 was 9.459 billion yuan, a year-on-year decrease of 8.19%; net profit loss to mother was 1,265 billion yuan, which changed from profit to loss (net profit of 384 million yuan for the same period last year).
Losses in pig breeding have put pressure on performance. In terms of pig breeding, the company's holding company's pig sales revenue in 2023 was 5.7 billion yuan, an increase of 4.31% over the previous year, and the holding and participating companies listed 6.0487 million pigs. The slump in pig prices in 2023 caused the company to lose money in pig farming, which dragged down the company's performance. By the end of 2023, the participating holding company could keep a total of more than 400,000 basic sows. We believe that the reduction in production capacity in this round may be enough to support a major cycle reversal, and we are optimistic about the profit growth opportunities that the subsequent rise in pig prices will bring to the company.
In terms of feed, by the end of 2023, the company's feed business had built nearly 100 production bases, with an annual production capacity of over 10 million tons, serving the national breeding market. In 2023, the company's feed sales revenue was 24 billion yuan, up 7.76% year on year; feed sales volume was 5.855 million tons, up 10.08% year on year, and net profit of feed business increased by more than 60% year on year.
In addition, in 2023, the company calculated impairment preparations for Hunan Jiuding Company and depreciation preparations for expendable biological assets. These factors also contributed to an increase in operating losses and 23Q4 losses in 2023.
Seed industry revenue has increased significantly! Optimistic about the company's leading genetically-modified technology layout!
In 2023, the company's seed industry achieved revenue of 1.4 billion yuan, a year-on-year increase of 48.84%; the number of seeds sold was 61.66 million kilograms, an increase of 47.39% over the previous year. Among them, corn seed sales revenue was 925 million yuan, up 63.82% year on year; rice seed sales revenue was 400 million yuan, up 12.95% year on year.
In terms of genetically modified technology, the company's 4 corn products have obtained agricultural genetically-modified biosafety certificates. They have good insect resistance and outstanding glyphosate resistance. The number of seed industry companies cooperating with its characteristic products has reached more than 200, covering 95% of the main domestic seed industry enterprises, and the leading edge in genetically-modified technology is obvious. We believe that the company's genetically modified technology research and variety layout (especially the layout of corn seeds) have laid a solid foundation for the company's commercial application of genetically modified technology. In December 2023 and March 2024, the official website of the Ministry of Agriculture and Rural Affairs published 2 batches of genetically modified varieties, and the company selected multiple genetically modified corn varieties.
We believe that the commercial application of genetically modified corn seeds has begun. The company has a leading layout in genetically modified technology and is rich in variety reserves. It is expected that the scale of the seed industry will be further expanded in the era of application of new technology, creating a new growth curve for the company.
Profit forecast: Due to current lower pig prices, we have lowered the company's profit for 2024. We expect the company's EPS to reach 0.03/0.30/0.31 yuan in 2024/25/26. We believe that the company's genetically-modified technology is leading, and the company's breeding industry is expected to become a new performance growth point in the context of domestic commercialization of genetically-modified corn; the company's feed base is solid; the 2024 pig cycle is expected to increase the company's pig performance and maintain a “buy” rating.
Risk warning: risk of feed raw material prices; risk of major epidemics and natural disasters; risk of changes in genetic modification policies; risk of uncertainty in seed industry development and promotion.