Performance summary: In 2023, the company achieved operating income of 1,253 billion yuan, +1.84% year on year; net profit to mother of 175 million yuan, +3.99% year on year; net profit after deduction of 154 million yuan, -0.17% year on year. Among them, 23Q4 revenue was 324 million yuan, -19.53% year-on-year; net profit loss to mother was 0.05 billion yuan, which changed from profit to loss year-on-year. The 24Q1 company achieved revenue of 235 million yuan, -23.27% year on year; net profit to mother was 0.27 million yuan, or -57.36% year on year; net profit after deducting net income to mother was 0.27 million yuan, or -56.10% year on year.
Comment: The pig fry business is under pressure in the short term, and the performance is resilient in reducing costs and increasing efficiency. During the reporting period, in the face of continued losses in the downstream aquaculture industry, the company's revenue and profit both increased. The main reason was that the company continued to implement the “big customer” and “big single product” marketing strategies, and the sales revenue of large aquaculture group customers achieved significant growth.
At the same time, the company achieved revenue growth while effectively controlling sales expenses by optimizing the product structure and leveraging the advantages of the “Pharmaceutical Vaccine Joint” product matrix. The company's comprehensive gross profit margin in '23 was 61.01%, -1.75pp year on year; the cost ratio for the period was 43.74%, -1.58pp year on year. By product, in 2023, the company achieved revenue of 434 million yuan, 416 million yuan, and 379 million yuan for pig vaccines, poultry vaccines, antibodies, and chemical products, respectively, of -5.9%, +10% compared with the same period last year. The pig industry was sluggish in 2023, and funding was tight, leading to a decline in vaccine demand.
The reversal of the aquaculture industry cycle may lead to a sharp rise in volume and price in the insurance sector. In recent years, the downstream aquaculture industry has continued to lose money, market demand is sluggish, and customer prices are sensitive, which has had a certain impact on the company's market development. According to data from the National Bureau of Statistics, at the end of the first quarter of 2024, the number of pigs stored nationwide was 408.5 million, a decrease of 22.44 million heads compared to the same period last year, a year-on-year decrease of 5.2%, setting a new low in 4 years. Judging from the number of pigs stored, it has been declining for 2 consecutive quarters since the third quarter of 2023, and the decline is increasing rapidly. At the end of the first quarter of 2024, the number of breeding sows was 39.92 million, a year-on-year decrease of 7.3%, and the number of breeding sows hit a four-year low. The double bottom of production capacity and storage indicates that pig prices will maintain an upward channel in the future, and the profit cycle is expected to continue for a long time.
Looking ahead to 2024, as production capacity on the aquaculture side continues to decline, the cycle may reverse or drive a sharp rise in volume and price in the insurance sector.
Vigorously promote major product research and development, and broaden the product matrix. During the reporting period, the company invested 10.109 million yuan in R&D, accounting for 8.07% of revenue. Three new national veterinary drug registration certificates have been obtained, including porcine parvovirus bacuvirus vector inactivated vaccine (PPV-VP2 strain), chicken infectious rhinitis trivalent inactivated vaccine (type A HN3 strain + type C SD3 strain), and Puhu granule. Among them, porcine parvovirus baculovirus vector inactivated vaccine (PPV-VP2 strain) filled the gap in domestic porcine parvovirus subunit vaccines. Four vaccine products, including the trifecta vaccine for dogs, have obtained approval for clinical trials. The company and its subsidiaries have applied for 23 invention patents and obtained 13 patent authorizations, including 3 international invention patents. The African swine fever subunit vaccine entered an emergency evaluation organized by the Ministry of Agriculture and Rural Affairs; the bivalent genetic engineering subunit vaccine for swine foot-and-mouth disease (type O+A) has now met the conditions to be declared for clinical trials, and the avian influenza (H5+H7) recombinant trivalent subunit vaccine has been submitted for registration as a new veterinary drug.
Profit forecasting and investment advice. EPS is expected to be 0.73 yuan, 0.82 yuan, and 0.99 yuan respectively in 2024-2026. The corresponding dynamic PE is 24/21/18 times, respectively, maintaining the “holding” rating.
Risk warning: Risks such as outbreaks of outbreaks in downstream aquaculture and R&D progress falling short of expectations.