Core views:
Low pig prices in the first quarter dragged down performance, and overall it was in line with expectations. The company released its 2024 quarterly report. The company achieved revenue of 1,996 billion yuan, yoy +0.52%, and net profit to mother of loss of 157 million yuan, yoy -50.41%, mainly due to low pig prices and year-on-year increase in sales volume in Q1; the company's accrued asset impairment loss of 14.67 million yuan in the first quarter; the company's balance ratio as of 24Q1 was 74.68%, up 2.1 pct from the end of 23.
The number of pigs released is growing steadily, and production capacity is expected to continue to be released. According to the company's livestock and poultry sales briefing, 657,000 pigs were released in the first quarter, an increase of 23% over the previous year. Of these, 607,000 were fat pigs and 50,000 piglets were sold. According to the equity incentive target, the target sales volume for 24 pigs is 5 million heads, and the trigger value is 4 million heads. According to the Investor Relations Activity Record, the company is currently able to breed close to 150,000 sows, which will increase appropriately this year. As of 24Q1, the company's productive biological asset balance is about 288 million yuan, an increase of 4.8% over the end of 23.
Production efficiency continues to improve, and farming costs are steadily declining. The company continues to reduce pig breeding costs by strengthening procurement management, optimizing feed formulations, and improving production efficiency. According to estimates, the 24Q1 commercial pig head lost about 255 yuan, with an average total cost of about 16.4 yuan/kg. According to the Investor Relations Activity Record Form, there are currently 25 PSYs, the overall survival rate is 88-89%, and the cost of weaned piglets is 370 - 380 yuan/head. As the cost of feed ingredients decreases and the share of French breeding pigs increases, etc., breeding costs are expected to drop further in the future. The company's 24-year average full cost target is 16 yuan/kg, and plans to drop to 15.5 yuan/kg by the end of the year.
Profit forecasting and investment advice: Maintain a “buy” rating. We estimate that the company's net profit for 2024-26 will be 823/15.59/2,078 million yuan, respectively, and the corresponding EPS will be 1.33, 2.52, and 3.36 yuan/share, respectively. Refer to industry comparable company valuations. Considering the company's high growth rate, the company was given 20 times PE in 2024, corresponding to a reasonable value of 26.58 yuan/share, maintaining a “buy” rating.
Risk warning. Risk of fluctuations in livestock and poultry prices, risk of fluctuations in raw material prices, risk of animal diseases, and food safety risks.