High cost ratios put pressure on performance in the short term. Waiting for post-cycle performance recovery, maintaining the “buy” rating company's 2024 three-quarter report, 2024Q1-Q3 revenue of 0.762 billion yuan (YoY -17.96%) and net profit to mother of 0.106 billion yuan (-40.67% YoY), of which single Q3 revenue was 0.279 billion yuan (-10.30% YoY) and net profit to mother 0.032 billion yuan (YoY -48.74%). As of the end of September 2024, the company's balance ratio was 14.61% (YoY -3.65pct). The company's performance is under pressure due to increased competition in the industry and the high cost ratio of the company. We lowered the company's profit forecast for 2024-2026. The company's net profit for 2024-2026 is expected to be 1.30/1.89/2.29 billion yuan (the original forecast for 2024-2026 was 1.67/2.02/2.32, respectively), the corresponding EPS was 0.37/0.54/0.66 yuan, respectively, and the PE corresponding to the current stock price is 33.7/23.2/19.1 times. The company attaches importance to R&D and innovation. As pig storage resumes, the company's performance is expected to recover and improve, maintaining a “buy” rating.

Pork seedlings and chemicals are under pressure for a short period of time, and ruminants and pet seedlings continue to release biological products: 2024Q1-Q3 revenue was 0.567 billion yuan (-9.68% YoY), of which revenue for pigs/poultry/ruminants/pets was 2.53/0.301/0.002/0.012 billion yuan, respectively (-23.75%/+1.71%/+ 87.91% /--). Chemicals: 2024Q1-Q3 revenue was 0.157 billion yuan (YoY -41.68%), of which pet revenue was 0.011 billion yuan (+4.39% YoY). Looking at revenue by product, the company's short-term operations of pig seedlings and chemicals are under pressure. Revenue from ruminant seedlings has maintained a high growth trend, and pet seedlings continue to be released. 2024Q4 pig prices are operating at a relatively high level, and pig storage is gradually recovering. Combined with the high incidence of the winter epidemic, the company's performance is expected to recover.

The short-term high cost rate during the period led to a decline in net interest rates. The company attached importance to the continuous growth of R&D and innovation investment in 2024Q3, the company's gross sales margin of 63.08% (year-on-year -8.02pct), and the period expense ratio was 41.07% (+4.17pct year over year). Among them, the sales/management/finance expense ratios were -1.41/+5.26/+0.31pct, respectively. The increase in the cost rate during the period when Placo (Nanjing) engineering projects were converted, and some production lines were included in depreciation management during the high-temperature shutdown period Expenses have led to a significant increase in management rates. The company attaches importance to R&D innovation. 2024Q1-Q3 spent 0.069 billion yuan on R&D (+12.81% year over year), and the company has sufficient reserves of new products and continues to grow.

Risk warning: pig storage recovery falls short of expectations, industry competition intensifies, and new product launches fall short of expectations.