Event: the company announced that in the mid-2023 report, the total income of 23H1 was 6.726 billion yuan,-1.30% compared with the same period last year, the net profit was-624 million yuan (36 million yuan in the same period last year), and the non-return net profit was-464 million yuan in the same period last year (89 million yuan in the same period last year). The total income of 23Q2 is 3.25 billion yuan,-6.48% compared with the same period last year. The net profit returned to the mother is-646 million yuan (13 million yuan in the same period last year), and the non-return net profit is-487 million yuan in the same period last year (43 million yuan in the same period last year).

In the first half of the year, the income side declined due to the impact of pig prices, and the B-end customers of prefabricated dishes continued to expand. 23H1's fresh frozen meat revenue was 4.702 billion yuan, down 8.51% from the same period last year, mainly because domestic pig prices remained low in the first half of the year, while slaughtering revenue accounted for 69.91%, thus dragging down the company's overall revenue. The income of 23H1 food sector is 1.078 billion yuan / year-on-year + 58.76%, mainly due to the high income of prepared dishes. In the first half of the year, the revenue of prepared dishes is 962 million yuan / year-on-year + 89.42%, and the proportion of revenue increased to 14.30% over the same period last year, mainly due to the incremental contribution of the company's B end superimposed last year's low base. The income of cooked food products in the first half of the year is 116 million yuan / year-on-year-32.30%, mainly due to the adjustment of the company's product structure and strategic focus. The import trade income of 23H1 was 644 million yuan, down 12.28% from the same period last year.

Gross profit margin is under pressure, credit impairment + asset impairment is a drag on performance. 23H1/Q2 gross profit margin year-on-year-5.38pct/-12.13pct, gross margin year-on-year loss, mainly due to the slaughtering / food industry gross profit margin year-on-year decline in 2.19/2.85pct. The 23H1 sales / management / R & D / financial expense rate is 1.18%, 1.99%, 0.08%, 0.45%, 0.45%, compared with the same period last year. The overall increase in the expense rate is mainly due to the weakening of scale effect. Combined with the above factors, the net profit of 23H1 is-668 million yuan, which is a loss compared with 90 million yuan in the same period last year, and the net profit of Q2 is-705 million yuan (44 million yuan in the same period last year). Due to the low pig prices in the first half of the year, the company made an impairment of 190 million yuan in biological assets and 170 million yuan in asset impairment in the breeding business, resulting in a large loss in the breeding sector and a drag on the overall performance.

Profit forecast and investment suggestion: according to the profit forecast adjusted by the China Daily, it is estimated that the operating income from 2023 to 2025 will be 162.47 yuan, 178.85 billion yuan, respectively, an increase of 0.81%, 10.08% and 8.84%, respectively, and the net profit of returning home will be-4.04 million yuan, respectively, and the year-on-year increase will be-636.50%, 133.94%, 48.93% EPS,-0.37 and 0.130.19 yuan, respectively. Corresponding to the closing price on September 11, 2023, the PE in 2024-2025 is 58.90 Universe 39.55 times, maintaining the "overweight" rating.

Risk hints: pig price fluctuation risk, pig epidemic risk, prefabricated vegetable market competition risk, food safety risk.