occurrences

The company disclosed the 2024 semi-annual report, achieving revenue of 14.971 billion yuan, a year-on-year decrease of 10.40%; net profit to mother -0.034 billion yuan, a year-on-year decrease of 34.26%.

Competition in the industry intensified, and profit margins declined year-on-year

In the first half of 2024, the company's gross sales margin was 5.29% (+0.45pct year on year), and the net sales margin was -0.52% (-0.19pct year on year). The company's sales/management/ R&D/ finance expenses for the first half of 2024 were 3.54/0.325/0.019/0.083 billion yuan respectively, -0.13%/+10.09%/-62.79%/+3.98% year-on-year respectively. The decline in operating income was mainly due to a year-on-year decline in feed sales, feed prices, and chicken prices in the current period; changes in management expenses were mainly due to year-on-year increases in employee remuneration, depreciation, etc. in the current period; changes in R&D expenses were mainly due to a decrease in R&D projects in the current period.

Livestock and poultry storage is running at a low level, and feed sales are under pressure

In the first half of 2024, the company's holding company sold 1.815 million tons of feed (-8.29% year-on-year), including 0.049 million tons of premix, 0.339 million tons of concentrate, and 1.427 million tons of compounds; 0.599 million tons of pig feed, 0.838 million tons of poultry feed, 0.319 million tons of ruminant feed, and 0.059 million tons of other feed. Looking ahead to the future market, the decline in the company's feed sales is expected to gradually narrow as pig storage gradually recovers.

Sluggish white chicken prices put pressure on the sector's performance. In the first half of 2024, domestic white feather chicken prices and split broiler prices continued to drop. The company controlled participating companies to slaughter a total of 0.42 billion white feather broilers, an increase of 14% over the previous year. The total production and sales split product was 1.1 million tons, an increase of 16% over the previous year. The reduction and adjustment of domestic pig production capacity has come to an end, and market supply has clearly been tightened. Pig prices have been low and high since the beginning of the year. In the first half of 2024, the company controlled participating companies listed a total of 0.58 million pigs, including 0.44 million fat pigs, 0.12 million piglets, and 0.02 million breeding pigs.

Performance is expected to gradually increase, giving a “gain” rating

We expect the company's 2024-2026 revenue to be 33.291/35.943/38.491 billion yuan, respectively, -7.45%/+7.97%/+7.09% year-on-year; net profit to mother is 0.268/0.345/0.435 billion yuan, respectively, with year-on-year growth rates of 158.66%/28.50%/26.36% and EPS 0.29/0.37/0.47 yuan respectively. Considering the gradual recovery of the company's feed sales, livestock farming is booming Restore, give it an “gain” rating.

Risk warning: risk of fluctuations in raw material prices, risk of fluctuations in livestock and poultry prices, risk of major epidemics