The company released its 2024 quarterly report. The company achieved revenue of 1,082 billion yuan in 2024Q1, +20.82% year-on-year, and +5.93% month-on-month; realized net profit to mother of -3.5659 million yuan, compared to -106 million yuan in the same period last year, a sharp decrease in losses over the previous year.
Significant cost improvements have helped the main business reduce losses. In terms of cost, 24Q1's breeding cost was reduced to 13.5 yuan/kg, and the total cost was 14.5 yuan/kg. The significant cost improvement was mainly due to: (1) the cost of pig seedlings decreased, and the cost of weaned piglets in Q1 dropped to 330 yuan/head; (2) the cost of feed ingredients such as corn decreased, and the company's feed cost decreased by about 0.6 yuan/kg compared to 23Q4; (3) the increase in the company's three-yuan pig ratio led to a decrease in the meat ratio in 24Q1. The total cost of the 24Q1 company in Guangxi has been reduced to 14 yuan/kg. With the increase in the share of the layout in Liangguang, the company's total farming cost still has a lot of room to expand. In terms of profit, according to our estimates, the average sales price of the 24Q1 company's commercial pigs was about 13.41 yuan/kg, -4.8% compared with the company's breeding costs of 13.5 yuan/kg. As pig prices begin a trending upward trend, the Q2 company is expected to turn a loss into a profit.
There was a high increase in sales in 24Q1, and production capacity reserves supported the achievement of long-term goals. 24Q1 listed 496,800 pigs, up 40.94% year on year and 21.68% month on month, including 479,600 fattening pigs, up 38.29% year on year, up 20.99% month on month; 17,200 piglets, up 201.75% year on year, up 44.54% month on month. In terms of production capacity, as of the end of March 2024, the company was able to breed about 90,000 sows. With the delivery of 16,000 sow farms in Guangxi in May, it is expected that the storage scale of sows will reach nearly 130,000 by the end of 24. Combined with 24Q1's PSY level of 27.2, it is highly certain that 3.5 million heads will be released in '25.
Maintaining a “buy” rating: The company is an integrated enterprise in the pig breeding industry chain, with excellent cost control capabilities and a perfect epidemic prevention and control system. We are optimistic about the company's future growth. As the cycle reverses, the company is expected to achieve high performance growth. Considering that the company's cost improvement exceeded expectations, we raised the 2024 net profit forecast to 492 million yuan (10.9% increase from the previous forecast). Based on the company's cost reduction progress and objective estimates of pig prices in '25, the net profit forecast was slightly lowered to 2,058 billion yuan (the previous forecast was 2,059 million yuan, which is basically the same), and the net profit forecast for the additional 26 years was 1,357 billion yuan, equivalent to EPS of 0.94/3.92/2.59. The current stock price corresponds to P/E at 39/9/14 times, and maintained” “Buy” rating.
Risk warning: the risk that pig prices will fall short of expectations, the risk of fluctuating raw material prices, and the risk of a sudden large-scale epidemic.