Performance summary: in the first three quarters of 2022, the company achieved operating income of 560 million yuan, an increase of 5.4% over the same period last year, and a net profit of 17.88 million yuan, a decrease of 76.8%. The net profit after deducting non-return was 2.173 million yuan, a decrease of 96.5% over the same period last year. In the third quarter alone, the operating income was 180 million yuan, basically the same as the same period last year, a decrease of 6.7% compared with the same period last year. The net profit of returning to the mother was-3.344 million yuan, down 113.3% from the same period last year, and 144.1% from the same period last year. The net profit after deducting non-return was-7.233 million yuan, a decrease of 139.8% over the same period last year. The decline in the company's performance compared with the same period last year is mainly due to factors such as high feed costs and low profits in breeding, and the fillings mood is weak. As a laying hen seed production enterprise, the company has sales pressure, and the sales gross profit level in the third quarter is 7.8%. It was 4.8 percentage points lower than the second quarter and 22 percentage points lower than the same period in 21 years. The company sold 150 million chicken products in the first three quarters and 51.279 million chickens in the third quarter alone, up 1.5 percent from the previous quarter, but the sales revenue was 150 million yuan, a decrease of 10.6 percent. According to the analysis of per capita income, it was 2.90 yuan per feather in the third quarter, a decrease of 11.9 percent from the previous quarter.

The layer consumption attribute is strong, the market demand is broad, the integrated enterprise is expected to usher in the increase of market share. According to the industry data disclosed in the company's prospectus, the demand for parents' egg breeders is between 1300 and 20 million sets per year, with sales of about 0.8 to 150 million yuan, and commercial egg chickens for about 10 to 1.5 billion chickens, with sales of about 4 billion yuan. egg production is about 23 million tons, sales of about 160 billion yuan. The high price of eggs is expected to promote the replenishment of laying hens. instead of seasonally falling after the National Day, egg prices have risen to 6.6yuan / jin. Currently, the stock of laying hens is lower than the historical level. According to data from Zhuochuang, there are about 1.18 billion laying hens in September 2022, an increase of 0.2% from the previous month and 1.7% from the same period last year, which is still a low in recent years, supporting egg prices. Demand for the fourth quarter for the traditional peak season is expected to usher in growth, the price trend is expected to promote breeding enthusiasm, the company's downstream demand, business improvement. Imported breeds have higher capacity utilization due to better egg laying performance and other characteristics. the company's ancestral breeder chickens are American Highland products with high market recognition. And the company covers the marketing network throughout the country, with great influence, and Beijing Yukou, Huayu Agricultural Science and other enterprises rank first echelon in the laying hen seed production industry. By grasping the trend of integrated breeding of grandparents and parents, the company can enjoy dividends to the greatest extent in the process of increasing market concentration.

The company has obvious advantages in business model, biosafety and so on, and the leading production capacity of laying hens is steadily expanding, which is expected to further increase market share. In 2021, 170 million chicks were sold, an increase of 20.1% over the same period last year, and the national market share reached 15%. From the perspective of introduction, the company introduced 50006 ancestral egg breeder chickens in 2021, accounting for 31.8% of the total number of ancestral egg breeder chickens introduced in the country. The company adopts the business model of "centralized culture and decentralized incubation" in Minning, Qingtong Gorge and Alashan breeding bases, making use of the location advantages of low fixed cost and high biosafety; after that, the breeding eggs are transported to Ningxia, Henan, Xinjiang, Jilin and other places for hatching, and then transported to customers to reduce loss and cost; the organization mode of husband and wife parcel helps to improve work efficiency and ensure stability. The company pays attention to the construction of biosafety system, which is located at the eastern foot of Helan Mountain and Alashan Mountain in Inner Mongolia. Helan Mountain is used as a natural barrier to block the spread of strong convective air and bird-borne disease, and has excellent isolation conditions. Strictly control the entry and exit of vehicles, minimize manual participation and reduce risk in the feeding process. The biological operation process of "all in and all out", closed management and rotating empty field is conducive to comprehensive disinfection to ensure health. In the future, 340 million and 430 million yuan will be spent on the construction of Alashan million breeder chicken ecological breeding base and Alashan breeder chicken farm, and 330 million yuan will be raised by issuing convertible bonds in 22 years, of which 200 million will be invested in the Hongsibao intelligent agricultural industry demonstration park parent seed industry base project to further expand production capacity and enhance market competitiveness.

Profit forecast and investment advice. Due to the weak sentiment in the downstream column, the profit forecast is adjusted. It is estimated that the EPS for 2022-2024 will be 0.2,0.52,0.71 yuan respectively, and the corresponding dynamic PE will be times that of 80-30-22, maintaining the "hold" rating.

Risk tips: rising feed prices, poultry breeding epidemic, lower-than-expected demand, and so on.