Incident: Throughout 2023, the company achieved total revenue of 89.9 billion yuan, an increase of 7.40% over the previous year; realized net profit of 6.4 billion yuan to mother, and net profit of 5.3 billion yuan for the same period last year. In the first quarter of 2024, the company achieved total revenue of 21.8 billion yuan, an increase of 9% over the previous year; realized net profit to mother - 1.2 billion yuan, and a loss of 2.7 billion yuan in the same period last year. At the same time, the company announced an annual distribution plan and plans to distribute cash of 1 yuan (tax included) for every 10 shares to all shareholders, for a total of 636.2 million yuan (tax included).
Pig and chicken breeding volume is growing rapidly, and the downturn in the industry is dragging down performance
1) The number of products sold as main products, pigs and broilers, is growing rapidly. In 2023, the number of pigs released was 26.2622 million, up 46.65% year on year; 1,183 million broilers were sold, up 9.51% year on year. The pig industry continued to lose money in 2023. The sharp drop in sales prices caused deep losses in the pig farming business, and the profit of the broiler business declined year-on-year. 2) In 2024, the company's broiler sales volume is planned to increase by 5%-10% year on year, and the pig release plan is 30 to 33 million heads, an increase of 4 to 7 million heads over the previous year. By the end of February, the company was able to breed about 1.55 million sows, which is expected to increase by 5-10 million by the end of the year. The company has sufficient sow production capacity and is expected to meet the listing target.
Core production indicators continue to improve, and production cost control is better
1) In 2023, the cost of hairy pigs decreased by 3.44% year on year, and the market rate of pork pigs was 92%, an increase of 2 pct year on year; PSY 22.1 for breeding pigs, an increase of 2.1 heads over the previous year. In the first quarter of 2024, pig breeding costs continued to drop to around 7.6 yuan/kg, down about 0.5 yuan/kg from quarter to quarter. In March, breeding costs were reduced to about 7.4 yuan/kg, and single-headed pork pigs basically achieved a break-even balance. 2) In 2023, the cost of hairy chicken decreased by 0.66% year on year, and the broiler market rate was 94.9%, maintaining a high level.
In the first quarter of 2024, the total cost of showing chicken was reduced to around 6.4 yuan/kg, and in March it had dropped to around 6.3 yuan/kg.
Capital reserves are abundant, and dividend payments show confidence in development
The company's cash flow situation is good. The net operating cash flow in 2023 was 7.6 billion yuan, the cash interest guarantee ratio is at a high level, and the available capital inventory is sufficient. At the end of the first quarter of 2024, the company's various types of capital were about 11 billion yuan, of which nearly 10 billion yuan was unrestricted. The company's debt structure is reasonable. Short-term and medium-term interest-bearing debt accounts for about 45%.
The company's dividend payments continued to be stable, and cash dividends during the loss period showed confidence in development. This profit distribution is the 12th cash dividend since the company went public at the end of 2015. The total amount of cash dividends to shareholders will exceed 25.8 billion yuan.
Profit Forecasts, Valuations, and Ratings
Due to large cyclical fluctuations in pig prices, profit forecasts have been adjusted. We expect the company's revenue in 2024-26 to be 1115.99/1214.52/ 128.866 billion yuan, respectively, with year-on-year growth rates of 24.13%/8.83%/6.11%, respectively, and net profit to mother of 69.20/122.96/15.802 billion yuan, respectively. The year-on-year growth rates are turning losses into profit/ 77.69%/28.51%, respectively.
EPS for 23-25 was 1.04/1.85/2.38 yuan, respectively. Referring to the company's historical valuation center and the average valuation of comparable companies, the company was given 24xPE in 2024, with a target price of 24.96 yuan, maintaining a “buy” rating.
Risk warning: Release volume falls short of expectations; risk of pig price fluctuations; risk of animal disease;