The company is based in Shandong and northern Jiangsu, and focuses on slaughtering meat ducks and broilers. The company's main business covers the four major sectors of poultry slaughter, feed, poultry breeding, and cooking. It has established an industrial chain operation map integrating feed, seedlings, incubation, slaughter and processing, and deep processing around the two major categories of chicken and duck. Since its establishment, the company has focused on slaughter and processing, based in Shandong and northern Jiangsu, and has driven the continuous expansion of business scale with an asset-light model. In 2023, the company's slaughter sector accounted for 74% of revenue (of which duck/chicken products contributed 42%/31% to total revenue, respectively). Poultry sales reached 1.65 million tons, and the revenue scale exceeded 20 billion yuan (CAGR of 15% in the past five years). Meat duck and broiler slaughter both ranked among the highest in the country, making it one of the largest domestic poultry slaughter and processing enterprises.

Cost side: Continuously improving the ratio of seedlings is expected to enhance cost controllability. In terms of breeding, in 2023, the company launched a joint venture “White Feather Meat Duck Breeding and Incubation Project” in Heze, which is expected to generate about 70 million birds' incubation and sales capacity. In terms of feed, the company's 300,000 ton poultry fund-raising project has reached production and is actively leasing idle production capacity in surrounding areas, and the sales scale is expected to maintain a relatively rapid growth rate. In the future, the company will focus on the goal of strengthening the chain and continue to improve poultry seedlings and feed packages. Sales of related products are expected to maintain an upward trend, thereby partially hedging the pressure caused by upstream cost fluctuations on the company's slaughter process.

Revenue side: Slaughter production capacity is expanding steadily, and the refining business is developing rapidly. In terms of production capacity, the slaughter scale of the company's meat duck business depends on the commissioning of fund-raising projects and the steady expansion of government-enterprise cooperation projects. In the future, the company's meat duck slaughter production capacity is expected to expand by 100 million birds and achieve effective coverage of the Guangdong-Hong Kong-Macao Greater Bay Area market; the company's broiler business signed an investment framework with the Suqian local government in May, and the “Suyiyu Ke Headquarters and Whole Industry Chain Project” is expected to expand the company's broiler breeding and slaughter process by 100 million feathers in the future. In terms of products, the company's cooked products business continues to enrich its product matrix, gradually expand production capacity, and maintain rapid revenue growth. It is expected that the company's profitability will continue to be strengthened in the future.

Sentiment: The pig cycle is on the right, which is expected to drive the poultry industry boom at the same time. On the supply side, domestic broiler and duck production capacity has been reduced in recent years due to the downward cycle of meat and the effects of overseas bird flu. On the demand side, due to the decline in production capacity in the early stages and the impact of the epidemic, the pig supply gap gradually became apparent. The pig cycle is on the right side, and the subsequent rise in pig prices is expected to drive poultry consumption at the same time. Taken together, tight supply combined with a boost in alternative demand, the poultry industry is expected to continue to recover from the bottom, and the company's main business is expected to directly benefit.

Profit forecasting and valuation: As one of the largest domestic poultry slaughter and processing enterprises, Yike Foods is progressing steadily and is expected to benefit from a recovery in livestock and poultry farming. The company's net profit for 2024-2026 is estimated to be RMB 2.1/2.2/180 million (+224%/3%/-19% YoY), and EPS of RMB 0.5/0.5/0.4, respectively. Through multi-angle valuation, we expect the reasonable valuation range of the company's stock to be between 9.4-10.2 yuan, with a 5% to 10% premium space compared to the current stock price, giving it a “superior to the market” rating.

Risk warning: risk of poultry disease; risk of large fluctuations in feed raw materials; food safety risk.