The company achieved revenue of 3.807 billion yuan in the first three quarters, -12% year-on-year, and net profit to mother of 0.112 billion yuan, or -58% year-on-year. Among them, 24Q3 achieved revenue of 1.394 billion yuan, -10% year-on-year and +4.38% month-on-month; net profit to mother of 81.21 million yuan, +28% year-on-year and +242% month-on-month, mainly due to declining costs. Looking ahead to the future market, on the supply side, judging from the production capacity of white feather broiler ancestors and parents across the country monitored by the Association, we expect that the supply of white feather broiler may still be sufficient; on the demand side, demand for white feather broiler products is relatively strong correlated with food and beverage consumption. We expect subsequent consumption recovery to drive an increase in demand for white feather chicken, which in turn will drive the price of white feather broiler to end a long period of time and reverse upward. Maintain a “buy” rating.

Q3 Chicken sales volume and price fell sharply year on year. Cost decline drove profit growth 24Q3 The sales volume and price of chicken products fell sharply year on year, but profits still increased year on year, or mainly due to the decline in the company's breeding costs driven by falling prices of feed ingredients. Let's take a look at the volume/price breakdown: 1) Raw chicken:

The company sold about 0.38 million tons of raw chicken in the first three quarters, or -1.6% year over year; of these, Q3 sales volume was 0.139 million tons, -4.9% year over month and +0.5% month over month. The average sales price was -9.2% year over year, up slightly from month to month. Q3 Although chicken sales prices fell year on year, we estimate that the company's breeding costs may have recorded a clear decline due to falling feed raw material prices and the company's cost reduction and efficiency, which in turn drives the profit growth of the farming and slaughter business. We estimate that Q3's raw chicken business profit is 6,500 to 75 million yuan, and the profit for a single chicken is about 0.9 to 1.4 yuan. 2) Condiments: The company sold 0.0194 million tons of prepared products in the first three quarters, +48% year over year, of which Q3 sales volume was about 0.007 million tons, +25% year over year. We estimate the company's condiment business or achieve a small profit.

Steady increase in production capacity is gradually released, and cost control ability is excellent

The first phase of the Zhucheng 0.12 billion annual broiler project funded by the company has been put into operation. The second phase of the project construction/equipment installation continues to advance. The company expects the farm and slaughter and processing plant to be put into operation in October 2024. After all production is put into operation, Xiantan's broiler slaughter capacity will reach 2.5 to 0.27 billion, and the annual meat processing capacity will reach 0.7 million tons, and the company's production capacity will double. At the same time, the commercial farming process of the company's Zhucheng project added supplier elements to the “company+farm” basis, and adopted the “company+supplier+farm model”, which may effectively reduce farming risks. In addition, the company's cost control capabilities are still excellent, driving the company to be able to achieve profits even when the industry loses money in farming and slaughter. The company's cost advantage may mainly come from farmers having a strong incentive to improve farming efficiency under the cooperative farming model, while less investment in fixed assets reduces financial expenses and subsequent depreciation costs.

Profit forecasting and valuation

We maintain our profit forecast. We expect the company's net profit to be 0.219/0.417/0.408 billion yuan in 2024/25/26, corresponding EPS of 0.25/0.48/0.47 yuan, respectively. Referring to comparable companies, Wind agreed to expect an average PE value of 14 times in 2025. Considering that the company's cost advantage still exists, the company was given 15 times PE in 2025, with a target price of 7.20 yuan, maintaining a “buy” rating.

Risk warning: chicken price rise/cost falling short of expectations, sudden large-scale bird flu outbreaks, etc.