With a loss of 2,174 billion yuan in 2023 and a loss of 209 million yuan in 2024Q1, the company released the 2023 annual report and the first quarter report for 2024: achieved revenue of 33.39 billion yuan in 2023, up 3.1% year on year, and realized net profit to mother of -2174 billion yuan, which turned into a year-on-year loss. The decline in performance was mainly due to losses in the farming business combined with asset impairment and credit impairment; among them, 2023Q4 achieved revenue of 9.459 billion yuan, a year-on-year decrease of 8.2%, and net profit to mother of 2024Q1 Revenue of 6.707 billion yuan, a year-on-year decrease of 13.8%, and net profit to mother - 209 million yuan.
The feed business grew steadily, and the seed business performed well
In 2023, the company's feed products achieved revenue of 24.021 billion yuan, an increase of 7.8% over the previous year. Feed revenue accounted for 71.9% of operating income, with a gross profit margin of 12.4%, an increase of 0.92 percentage points over the previous year. Export sales of feed were 5.8505 million tons, up 10.1% year on year. Among them, pig feed sales were 4.6592 million tons, up 14.0% year on year, sales of ruminant feed were 670,400 tons, up 5.5% year on year, and sales of aquatic ingredients were 324,200 tons, down 24.6% year on year. In 2023, the company's seed products reached 1,405 billion yuan, a year-on-year increase of 48.8%. Seed industry revenue accounted for 4.2% of revenue and a gross profit margin of 32.3%, a year-on-year decrease of 5.32 percentage points. In 2023, the company's seed sales volume was 61.66 million kilograms, up 47.4% year on year. Among them, corn seed sales revenue was 925 million yuan, up 63.8% year on year; rice seed sales revenue was 40 million yuan, up 13.0% year on year.
In terms of biological breeding, as of 2024Q1, a total of 64 genetically-modified corn varieties have passed national certification, of which 37 varieties use the traits of Dabeinong, accounting for 58%; a total of 17 genetically-modified soybean varieties have passed national approval, including 6 varieties of Dabeinong's own high-oil, high-yield soybeans, and 9 varieties certified by Dabeinong.
In 2023, the company released 6.0487 million pigs, and 24Q1 breeding costs improved markedly. In 2023, the holding company's pig sales revenue was 5.702 billion yuan, an increase of 4.3% over the previous year. The number of pigs sold by holding and participating companies was 6.0487 million, an increase of 36.5% over the previous year. Among them, the holding company listed 3.6607 million heads, accounting for 60.5%; participating companies listed 2.388 million heads, accounting for 39.5%. The pig breeding business is developing steadily. The company continues to reduce costs and increase efficiency through breed optimization, enhanced biosafety prevention and control, and cost optimization. According to our estimates, the complete cost of pig breeding and fattening for 2024Q1 is about 15.1 yuan/kg.
The pig logic has changed to a reversal of pig prices. The impact cycle of heavy distribution and torrential rain in the south is high. From December 2022 to March 2024, the government was able to grow sow production capacity by about 9%. The market logic has changed from capacity reduction to pig price reversal. The reason why pig prices have been significantly higher than market expectations since this year is that the 2023Q4 epidemic in the north caused pigs to be released early, and the concentrated release of large pigs before the Spring Festival caused a relative shortage of large weight pigs after the holiday season. Price differences in standard fertilizer prices, pressure, and secondary fattening supported pig prices. Judging from the current point of time, changes in the average weight of pigs and the impact of torrential rain in the south on the epidemic will affect the price height of the current pig cycle.
Investment advice
We expect that in 2024-2026, the company will achieve operating income of 36.413 billion yuan, 42,459 billion yuan, and 47.920 billion yuan, up 9.1%, 16.6%, and 12.9% year-on-year, corresponding to net profit attributable to mother of 104 million yuan, 1,209 billion yuan, and 1.51 billion yuan, corresponding to EPS 0.03 yuan, 0.29 yuan, and 0.37 yuan, maintaining the “purchase” rating unchanged.
Risk warning
Outbreak; pig prices rise later than expected