Incident: The company announced its 2023 annual report and 2024 quarterly report. The company achieved revenue of 116.117 billion yuan, yoy 10.89%, net profit to mother of 2,741 million yuan, yoy -7.13%; in Q1 2024, revenue of 23.172 billion yuan, yoy -0.80%, net profit to mother of 881 million yuan, yoy 111%.
The feed business volume is rising rapidly, and sales of aquatic products can be expected to resume. The company achieved feed sales revenue of 95.956 billion yuan for the full year of '23, an increase of 13.03% over the previous year. The company achieved export feed sales of 22.6 million tons, of which sales of aquatic products, poultry and pig feed were 524, 11.30, and 5.79 million tons, respectively, up 2%, 13% and 17% year on year; profitability increased steadily, with a gross profit margin of 8.53% in the feed business in '23, an increase of 0.48 percentage points over the previous year. 24Q1 The company's feed sales maintained steady growth, and the sales volume of fish feed in Pushui turned positive (sales fell 9% for the full year of '23). The decline in the company's Q1 revenue was mainly due to a clear correction in the prices of bulk feed ingredients, and the subsequent decline in feed sales prices. The company's profitability has been rising steadily. The gross profit margin and net profit margin for 24Q1 were 10.75% and 3.88% respectively, up 1.48 and 0.86 percentage points from the previous year, respectively. We judge that the company's main feed business is expected to maintain a strong upward trend in volume throughout the year 24.
Farming costs are continuously optimized, and asset-light and profit-locked operation is steady. In terms of pig breeding, the company released 4.6 million pigs throughout '23. The team's professional capacity continued to improve, and various breeding indicators were continuously optimized. The annual yield on the breeding side increased by 26%, and the survival rate on the fattening side increased to over 97.5%; the company explored and implemented an operating model of “outsourced piglets, company+family farms, locking in profits, and hedging risks”. As the model gradually matures, the risk of fluctuations in pig breeding profits is expected to subside. In terms of aquaculture, the company's raw fish farming and prawn farming model and level of specialization continued to improve. Limited by low prices in the raw fish market, fish farming lost 300 million yuan throughout the year, which dragged down the company's overall performance.
We believe that the company's multi-dimensional core cost advantage will continue to protect the company's main feed business, and sales of aquatic products are expected to gradually resume. The specialization capacity of the farming business continues to improve. The asset-light and profit-locked model is expected to calm profit fluctuations and is optimistic about the company's long-term development potential.
Company profit forecast and investment rating: We believe that the company's main feed business grew steadily during the reporting period. The performance of the farming sector dragged down performance. The market is expected to gradually improve in the future, and the long-term development trend is improving. The company's net profit for 24-26 is estimated to be 40.78, 51.68, and 6.017 billion yuan, respectively, EPS of 2.45, 3.11, and 3.62 yuan, and PE of 20, 16, and 14 times, maintaining a “highly recommended” rating.
Risk warning: The company's feed sales fall short of expectations, the risk of pig price fluctuations, etc.