Incident: The company's 2023 revenue -11.19%, loss of 4.263 billion yuan; 2024Q1 revenue +8.57%, loss of 2,379 million yuan. In 2023, the company achieved operating income of 110.861 billion yuan (-11.19% YoY) and a loss of 4.263 billion yuan; revenue for the fourth quarter was -36.68% year-on-year, with a loss of 2,421 billion yuan. The company achieved revenue of 26.272 billion yuan in 2024Q1, +8.57% year-on-year; loss of 2,379 billion yuan.
Sluggish pig prices put pressure on the company's 2023 and 2024Q1 results. 1) Breeding business. In 2023, the company achieved revenue of 108.224 billion yuan, -9.62%; achieved sales of 63.816 million pigs, +4.27% year-on-year (including 1.367 million piglets, 180,000 breeding pigs, and 62.267 million commercial pigs), accounting for 8.8% of the total number of pigs released in the country, maintaining the highest market share. With 2024Q1, the company achieved sales of 16.011 million pigs, +15.6% year-on-year. 2) Slaughter business. In 2023, the company's slaughter and meat business achieved operating income of 21,862 billion yuan, +48.54% year over year; slaughtered 13.26 million pigs, 736.2, +80.11% year over year; the slaughter business capacity utilization rate increased to 46%, and the average head loss decreased.
The company's cost advantage is stable, and the scale is expanding steadily. 1) As of 2023, the company's breeding capacity is 80 million heads/year, and plans to release 66-72 million pigs in 2024. The company continues to update and optimize its population to support future scale growth. As of 2024Q1, the company was able to breed 3.142 million sows, +10.4% year over year, +0.4%; productive biological assets were 10.637 billion yuan, +43.9% year over year, compared to +14.2% at the beginning of the year. 2) The company continues to do a good job in health management and improve the level of refined management; develops nutritional formulations and applies low-soybean diet technology; and uses a reincarnation binary breeding system to reduce the risk of disease. The company's breeding costs continue to improve. The average total cost of commercial pigs in 2023 is about 15 yuan/kg; due to winter diseases, we expect the full cost of 2024Q1 breeding to temporarily rise to 15.4 yuan/kg. 3) The company's financial situation is relatively stable. 2024Q1, the company's balance ratio was 63.59%, compared with +1.48 pcts at the beginning of the year; monetary capital was 23.024 billion yuan, compared to +18.5% at the beginning of the year; and the net cash flow from operating activities was 5,067 billion yuan.
Investment advice: As a leading enterprise in the pig breeding industry, the company is expected to fully benefit from the subsequent rise in price cycles with excellent production management capabilities, steady growth in production capacity, and continuous strengthening of cost advantages. We expect the company to achieve operating income of 1234.5/1322.6/131.22 billion yuan in 2024-2026, net profit to mother of 124.2/200.0/21.22 billion yuan, and PE corresponding to the closing price on April 26 is 19.6/12.1/11.5 times, respectively, maintaining the “increase” rating.
Risk warning: risk of pig disease; risk that the number of pigs released falls short of expectations; risk of price fluctuations in bulk agricultural products