Incident: The company's 2023 revenue +1.83%, loss of 645 million yuan; 2024Q1 revenue +6.16%, loss of 138 million yuan. The company achieved operating income of 4,041 billion yuan (+1.83% YoY) and a loss of 645 million yuan in 2023; revenue for the fourth quarter was -28.73% YoY, with a loss of 303 million yuan. The company achieved revenue of 949 million yuan in 2024Q1, +6.16% year-on-year; loss of 138 million yuan.
The company's launch is growing rapidly, and poor pig prices are putting pressure on performance. 1) In 2023, the pig business achieved operating income of 3.463 billion yuan, or +15.81%; achieved 2.6737 million heads of pigs, with piglets accounting for about 32% and breeding pigs accounting for about 1%; due to the continued slump in pig prices and losses in the pig breeding business, the company prepared 111 million yuan for asset impairment in 2023, mainly including loss of inventory price decline, impairment of goodwill, and loss of right to use assets due to the shutdown of the poultry business. 2) In 2023, the company's feed business achieved revenue of 457 million yuan, -17.1% year-on-year, and feed output of 68,000 tons. 3) In 2023, the company's leather business achieved revenue of 86 million yuan, -71.7% year-on-year.
The company leads the industry in terms of average profit, and production and operation are relatively steady. 1) The company continues to strengthen pig breeding management, biosafety management and breeding process management to reduce mortality. The company's fat pig production cost in 2023 was 14.68 yuan/kg, maintaining the leading position in the industry. As scale effects gradually materialize, and management refinement and formulation optimization continue to advance, there is still room for the company's costs to decline. 2) The company's current production capacity is basically stable. As of 2024Q1, the company's productive biological assets were 377 million yuan, -2.4% compared with the beginning of the year; fixed assets were 3,694 billion yuan, +93.66% over the same period; the project under construction was 400 million yuan. The company's Dechang Superstar pig breeding integration project is expected to reach full capacity within 2024, supporting future growth. As of 2024Q1, the company's balance ratio was 62.19%, compared to +2.34pcts at the beginning of the year.
Investment advice: Since focusing on the pig breeding business, the company has had outstanding growth and leading cost control capabilities. We expect the company to achieve operating income of 76.97/104.71/12397 billion yuan and net profit to mother of 4.54/11.72/1,306 billion yuan in 2024-2026. The closing price corresponding to PE on April 29 was 39.3/15.2/13.6 times, respectively, maintaining the “increase in weight” rating.
Risk warning: risk of pig disease; risk of production capacity building falling short of expectations; risk of price fluctuation of bulk agricultural products; risk of fluctuating pig prices