The target for high-quality pig breeding, the 2024Q1 pig breeding sector is profitable as a whole. The company's revenue in 2023 was 3.891 billion yuan, +17.76% year on year, net profit to mother - 401 million yuan, -257.04% year on year; 1.52 million pigs were released, up 63.65% year on year; and butchered 1.7656 million pigs, up 22.23% year on year. The company's 2024Q1 revenue was 1,082 billion yuan, +20.28% year on year, net profit to mother - 0.04 billion yuan, +96.63% year over year; 496,900 pigs were released (including 479,700 commercial pigs), +40.96% year over year. Judging from the 2024Q1 net profit split, the overall profit of pig farming is estimated to be close to 10 million yuan. Among them, due to the recovery in pig prices at the end of March, breeding resale returned about 85 million yuan. In addition, there were losses in slaughter, deep processing of food, feed, headquarters expenses, etc. Thanks to the excellent level of cost control, the company's excess profit compared to industry farming is obvious, and the average revenue is leading the industry.
The farming cost performance is excellent, and it is in the first tier of the industry. The company has been deeply involved in the pig industry chain for more than 20 years, starting with the feed business, and began expanding the pig breeding and pig slaughter business in 2002 and 2005, respectively. In 2023, the company's breeding, slaughter and feed revenue accounted for 53.83%, 31.65%, and 12.81%, respectively.
Currently, the company's farming business is mainly distributed in Yunnan and Guangxi provinces. The company attaches importance to pig prevention and health care. Pig breeding performance is at the forefront of the industry. The company's breeding costs have continued to decline since 2023. The complete cost in 2024Q1 fell to about 14.5+ yuan/kg, and the cost of weaning piglets reached 330+ yuan/head, ranking first in the industry. The company's total cost target has been further reduced this year. It is fully prepared in terms of management model, talent reserve, full load operation, raw material procurement, etc., and is confident that it will achieve the expected goals.
The target for production is 3.5 million heads in 2025, and aquaculture production capacity is increasing steadily. By the end of 2024Q1, the company was able to breed about 90,000 sows; the PSY annual average was about 27.2. As pig farms under construction are completed and put into operation one after another, it is estimated that 130,000 sows will be kept by the end of 2024. The company targets to launch in 2024-2025 are 2.5 million and 3.5 million, respectively, and it is expected to continue to grow rapidly. At the same time, the company's capital safety margin is high. As of the end of 2024Q1, it had monetary capital of 609 million yuan, an increase of 11.9% over the end of 2023; the balance ratio is only 29.53%, and there is still plenty of room for financing in the future.
Risk warning: An uncontrollable outbreak occurred during the farming process, and the sharp rise in food prices increased feed costs.
Investment advice: Maintain “purchase” for pioneering high-quality pig breeding targets. The company's breeding costs have been steadily improving, and have now fallen below the 2024 cost of the original profit forecast assumption, so we lowered the 2024 cost assumption and raised the 2024 profit forecast accordingly; furthermore, considering the uncertainty of forward pig price fluctuations, the original 2025 pig price assumption was lowered based on the principle of conservatism and prudence, and the previous profit forecast for the company for 2025 was lowered accordingly. In summary, we expect the company's net profit to be 6.6/12.4/1.2 billion yuan for 24-26 (originally estimated net profit for 2024-2025 was 3.95/2.015 billion yuan, respectively), corresponding to the current stock price PE of 29/15/16 X.