On April 26, 2024, the company disclosed the 2023 annual report and the 2024 quarterly report. In 23, it achieved revenue of 110.861 billion yuan, -11.19% year-on-year; realized net profit of 4.263 billion yuan, and profit of 13.266 billion yuan for the same period last year. 24Q1 achieved operating income of 26.272 billion yuan, +8.57% year-on-year; realized net profit to mother of 2.379 billion yuan, an increase in losses over the same period last year.

There was a slight increase in the number of pigs released in '23, up 16% year on year: 63.816 million pigs were released in 2023, up 4.27% year on year, of which 1.367 million pigs were released, accounting for 2.14%; in 2024Q1, 16.04 million pigs were released, +15.85% year over year, including 597 million piglets. By the end of March, the company had managed to breed 3.142 million sows and had productive biological assets of 10.637 billion yuan, a significant increase over the third quarter of last year. As of 24Q1, the company's balance ratio was 63.59%. Against the backdrop of overall losses in the industry, the company expanded steadily at the bottom of the cycle.

The company plans to release 6600-72 million pigs in 2024, an increase of 5.5%-15.1% year-on-year, and still maintain a steady increase in the number of pigs released.

Short-term factors have increased farming costs, and the company's cost trend continues to decline: in 2023, the company's full cost dropped from 15.6 yuan/kg at the beginning of the year to 14.5 yuan/kg in September. The cost affected by the epidemic increased slightly in the fourth quarter, and the full cost for the whole year was around 15 yuan/kg.

In 2024, the company's listing settlement cost in Q1 was still affected by last year's epidemic. By the end of March, the company's full cost had dropped to 15.1 yuan/kg. With the continuous improvement of the company's production indicators, the company is expected to achieve the goal of a full cost of 14 yuan/kg by 2024.

Since 2023, the industry's production capacity has been removed for 15 months. Early epidemic losses have also reduced the supply of pigs in the second half of this year. It is expected that pig prices will improve in the second half of '24. According to the company's listing plan and pig price trends, we lowered our profit forecast for 2025. We expect the company to achieve net profit of 111.06/350.34/19.811 billion yuan in 24-26, reversing the year-on-year losses/ +217%/-43%; corresponding to EPS 2.02/6.41/3.63 yuan. The current price of the company's stock in 24/25 corresponds to a PE valuation of 22/7X, maintaining a “buy” rating.

Risk of pig price fluctuations; risk of epidemic; risk of fluctuations in raw material prices.