The cost of pigs has declined and increased steadily, and yellow chicken operations have remained steady and profitable, maintaining a “buy” rating
The company released its 2023 annual report and 2024 quarterly report. The 2023 revenue was $89.921 billion (+7.40%), and net profit to mother was $6.39 billion (-220.81%). 2024Q1's revenue was RMB 21.848 billion (+9.38%), and net profit attributable to mother was RMB 1,236 million (+55.04%). 2024Q1 pig prices have not declined during the off-season, and the company's net profit to mother has been drastically reduced year-on-year.
Along with the reversal of the 2024H2 pig cycle, the company's profit is expected to improve. We raised the company's 2024 profit forecast, lowered the 2025 profit forecast, and added the 2026 profit forecast. The company's net profit for 2024-2026 is 113.42/175.79/88.87 (the original forecast for 2024-2025 was 99.71/264.46 billion, respectively) billion yuan, and the corresponding EPS is 1.71/2.64/1.34 yuan, respectively. The PE corresponding to the current stock price is 11.2/7.3/ 14.4 times The company's pig costs have declined and increased steadily, and Yellow Chicken's operations have remained steady and profitable, maintaining a “buy” rating.
Pigs: Farming costs have declined steadily. Asset light helped the company continue to expand the company's pig breeding revenue of 48.504 billion yuan (+13.75%) in 2023, listing 26.262,200 thousand heads (+46.45%). The average annual pig sales price was 14.81 yuan/kg (-22.26%), and the full cost was 16.7 yuan/kg (17.26 yuan/kg in 2022). 2024Q1's revenue was 12.31 billion yuan (+24.45%), 7.18 million pigs were released (+28.32%), the average sales price was 14.26 yuan/kg, and the total cost was reduced to 15.2 yuan/kg. The full cost is expected to drop to less than 15.6 yuan/kg for the whole year of 2024. By the end of March 2024, the company's effective breeding capacity for pork pigs had increased to more than 35 million heads, with a breeding capacity of 1.55 million heads (expected to reach 1.6 million by the end of 2024), the market rate of pork pigs was 92%, PSY increased to 23, and the number of healthy pigs was 11. It is expected that 30-33 million pigs will be released in 2024 (+14.23% to 25.66%). Company costs have been falling steadily, and asset-light expansion continues.
Yellow Chicken: Leading the cost control industry. Steady incremental profit is expected to increase the company's broiler business revenue by 36.664 billion yuan (+3.04%) in 2023, sales volume of 1,183 billion units (+9.51%), average sales price 13.69 yuan/kg (-11.51%), and the full cost is about 13.6 yuan/kg. 2024Q1 has revenue of 7.652 billion yuan (-0.98%), sales volume of 267 million units (+0.20%), average sales price 13.02 yuan/kg (+1.29%), full cost 12.8 yuan/kg, falling to 12.6 yuan/kg in March. Broiler sales are expected to be +5% to 10% year-on-year in 2024. The company leads the yellow chicken breeding cost control industry, and sales volume continues to grow. It is expected that 2024 will be accompanied by a reversal of the pig cycle, and sector profits are expected to expand.
Risk warning: The recovery of pig storage falls short of expectations, increased industry competition, and disrupted animal diseases.