The company's recent situation
Haida Group recently attended the CICC Mid-Year Strategy Conference. The company exchanged views with participating investors on fishery price quotes, cost reduction and efficiency, and overseas layout. We believe that against the backdrop of marginal recovery in domestic aquatic product prices and continued promotion of feed going overseas, the company's main feed business is expected to grow steadily with high quality, the aquaculture business is expected to contribute to increased profits, and the release of annual results can be expected.
reviews
1. Domestic feed: The recovery in aquatic product prices drives sales growth, improving quality and efficiency and releasing tons of profit. 1) Aquatic products: General water supplies picked up across the board. According to Tongwei Agriculture and Animal Husbandry, grass carp/tilapia prices were +5%/+8%/+30% year on year in mid-June '24. The price recovery in general water stimulates farmers' enthusiasm to feed. We expect the company's general water supplies to grow rapidly; according to Tongwei Farming and Animal Husbandry, the prices of California/South American white prawn/crayfish are +29%/-18%/-9% year on year. We expect overall special water prices to be +29%/-18%/-9% year on year. Maintaining steady growth; 2) Livestock and poultry feed: competition for pig feed intensifies, increasing production capacity The impact of continued elimination of the impact of the 1H24 pig feed industry is expected to be under year-on-year pressure, competition will increase, and the company's pig feed business may be under pressure in the short term; steady growth in poultry and laying hens; we expect the company's poultry to maintain steady growth; 3) Improving quality and efficiency: We expect that with the completion of the basic layout of the company's domestic production capacity, the balance ratio is expected to decline, and the decline in depreciation, amortization, financial expenses, etc. is expected to support the continuous increase in the company's profit, and the main domestic feed industry is expected to grow steadily with high quality.
2. Overseas feed: Demand for high-quality protein is growing rapidly, and technical and management advantages are exporting dimensional reduction and impact.
1) Overseas layout: The company uses Southeast Asia as a bridgehead to overseas, lays out populous countries such as Vietnam and Indonesia, and spreads business to South America, Africa and other regions. According to Alltech statistics, feed sales in Asia (excluding China), South America, and Africa in 23 were 21/2/50 million tons, respectively, and the market space is vast. We believe that the company is expected to replicate the successful experience of domestic seedlings, animal protection, and feed in the “Golden Triangle”, export technical, management and service advantages, and continue to seize overseas feed market share. 2) Performance contribution: The company's overseas feed sales in '23 reached 1.71 million tons, an increase of 24% over the same period, accounting for 7% of sales. We expect the company's overseas feed product structure to be better, competitive advantage more prominent, and overseas feed tonnage profit may be higher than domestic feed.
3. Breeding business: Pig farming hedging fully contributes to profit growth and reduces the scale of fish farming. 1) Pig breeding: The asset-light platform-based breeding model of the company's outsourced piglet hedging is becoming more mature. According to Yongyi Consulting, the average price of 2H23/1H24 7kg piglets is 246/473 yuan/head respectively. We expect the company's 24 pig breeding business to turn losses into profit, high and low, contributing to profit flexibility; 2) Raw fish farming: According to Tongwei Agriculture and Animal Husbandry, the price will increase steadily throughout the year. Losses are expected to narrow.
Profit forecasting and valuation
The profit forecast remains unchanged. The current stock price corresponds to 21/17 times P/E in 24/25, maintaining the outperforming industry rating and target price of 62 yuan, corresponding to 27/21 times P/E in 24/25, with 28% upward space.
risks
Aquatic product prices are low, industry competition is intensifying, and there is a risk of animal diseases.