Introduction to this report:
The company issued a quick performance report, and both revenue and profit increased. The farming cycle is expected to improve in 2024, and the company will benefit from this. At the same time, the company develops and promotes multiple vaccines, and profits continue to grow.
Key points of investment:
Maintain an “Overweight” rating. In 2023, pig prices were lower than expected. In 2024, we expect the average price to remain low in the first half of the year, and the boom in the second half of the year will improve. As a result, the growth rate of industry demand for animal protection and immunization will be lowered in 2024 to 1.19/1.49 yuan (previous value 1.40/1.72 yuan).
The 2024 industry average was given 18.8 times PE, and the target price was lowered to 22.37 yuan (previous value 25.98 yuan), maintaining the “gain” rating.
Incident: The company released the 2023 performance report. In 2023, the company achieved operating income of 1,066 million yuan, +6.45% year over year, and achieved net profit of 418 million yuan to mother, +2.17% year on year. Achieved basic earnings of $0.90 per share.
The company's performance fell short of previous expectations. The peak season for pig prices in the fourth quarter of 2023 was not strong, pig prices weakened, breeding profits declined, and sales of main products were affected. The company continued its “improving quality, efficiency, and return” plan in the fourth quarter. The company and Huazhong Agricultural University carried out pig vaccine research and development work, forming high barriers in segmented fields. Cooperative research and development areas include vaccine research and development such as non-plague vaccines and swine epidemic diarrhea. In October 2023, the company's cat triple vaccine passed an emergency evaluation, which will provide the company with new profit growth points.
The 2024 pig cycle boom is expected to improve, and the company is benefiting from the recovery of downstream farming profits. In 2023, the number of sows that can be raised will continue to decline, and the industry's breeding profits will continue to lose money. In 2024, we expect the pig breeding industry to improve. As a post-vaccine cycle company, the company will also benefit from the positive demand for vaccines brought about by the improving farming boom.
Risk warning: epidemic risk, product price fluctuation risk, raw material price fluctuation risk.