Incident: The company announced its 2023 annual report and 2024 quarterly report. The company achieved revenue of 110.861 billion yuan, yoy -11.19%, net profit to mother of 4.263 billion yuan, yoy -132.14%; Q1 in 2024 achieved operating income of 26.272 billion yuan, yoy 8.57%, net profit to mother of -2379 million yuan, yoy -98.56%.
There was a slight increase in the number of pigs released, and the slump in pig prices affected performance. The company sold 63.816 million pigs in 23 years (including 62.267 million commercial pigs (including domestic sales), 1.367 million piglets, and 180,000 breeding pigs), a slight increase of 4.27% over the previous year. Through refined breeding management, the company continues to improve breeding performance and optimize breeding costs. The average annual total cost of commercial pigs reached about 15 yuan/kg (full cost in 22 years was 15.7 yuan/kg).
However, pig prices were sluggish throughout '23, and the average sales price of pigs fell by about 20% compared to '22, causing the company to lose results for the full year of '23. The 24Q1 company sold 16.01 million pigs (including 15.377 million commercial pigs, 597,000 piglets, and 107,000 breeding pigs), an increase of 15.64% over the previous year. Affected by Spring Festival sales and the epidemic, farming costs gradually rebounded to 15.8 yuan/kg in January-January, fell back to 15.1 yuan/kg in March, and are expected to continue to fall below 14 yuan/kg in the second half of the year. Since March, pig prices have clearly rebounded and remained volatile. It is expected that pig prices will continue to improve in the second half of the year as the supply and demand pattern tightens. Combined with the company's leading cost industry and continuous optimization, the company's performance will continue to improve.
Slaughter volume efficiency has improved, and average head losses have narrowed. In '23, the company slaughtered 13.26 million pigs, an increase of 80% over the previous year; sold 1.405 million tons of meat, achieving sales revenue of 21,862 billion yuan, an increase of 48.54% over the previous year; the capacity utilization rate increased to 46%, and the average loss narrowed to 70 yuan/head. In 24 years, the company will continue to develop meat sales markets and channels, optimize the customer structure, improve capacity utilization, and further enhance the profitability of the meat slaughter sector.
Company profit forecast and investment rating: We are optimistic about the company's core cost advantage as a leading pig company, and the company's performance is expected to continue to improve as the pig cycle recovers. We expect the company's net profit to be 67.70, 262.16, and 16.554 billion yuan, respectively, EPS of 1.27, 4.79, and 3.03 yuan, and PE of 35, 9, and 15 times, maintaining the “Highly Recommended” rating.
Risk warning: The company's pig sales fall short of expectations, the risk of pig price fluctuations, the risk of pig disease, etc.