Chicken seedlings scaled down and prices increased in February, maintaining a “buy” rating
In February, the company's sales volume of chicken seedlings declined month-on-month due to a contraction in the supply of commercial chicken seedlings, and sales prices rose by about 32% month-on-month due to increased enthusiasm from chicken farmers to fill up the list and a contraction in industry supply. The scale of the company is expanding steadily. The company's net profit for 2024/25/26 is estimated to be 1,239/12.71/597 billion yuan, respectively, and the corresponding EPS is 1.12/1.15/0.54 yuan. Comparable companies agreed to expect 12 times PE in 2024. Considering that domestic production capacity of high-quality ancestral chicken breeders is still scarce, the price of probiotic Li Feng varieties is expected to remain high, and at the same time, there is a contraction in the supply of commercial chicken seedlings or a marked increase in prices, we gave Probiotic 2024 a profit of 15 times PE, corresponding to a target price of 16.8 yuan, maintaining a “buy” rating.
In February, the volume and price of chicken seedlings contracted month-on-month, and the supply of commodities may be shrinking now
In February, sales revenue of probiotic white feather broiler seedlings was recorded at 207 million yuan, -24% year-on-year and +30% month-on-month. Among them, sales volume and sales price changes were -13% and -12%, respectively, and -1.5% and +32% month-on-month, respectively. In terms of sales, we estimate that the sales volume of chicken seedlings produced by parents in February was mainly due to changes in sales of commercial chicken seedlings. On the one hand, the decrease in sales of commercial chicken seedlings was due to the company's active adjustment of production plans, and on the other hand, it reflected a decrease in introduction in 2022 or gradually transmitted to the commercial chicken surrogate chain, or the current contraction. In terms of price, we estimate that the unit price of chicken seedlings sold by parents in February was about 25 to 35 yuan/set, which was a significant decrease from year to month, but still above the company's cost line; the unit price of commercial chicken seedlings sold was about 4 to 4.5 yuan/piece, with a slight year-on-year or month-on-month increase. On the one hand, the obvious increase in the price of commercial chicken seedlings may be due to a contraction in industry supply. On the other hand, the reason may be that the breeding side has a relatively high vacancy rate and is highly motivated to fill up the column.
Lifeng and Yibeng 909 have excellent performance, and can be expected to continue to expand in scale
The white feather chicken seedlings currently sold by the company are the new product “Lifeng”, which has obvious competitive advantages in egg production rate, meat ratio, disease resistance, and survival rate. Currently, its parent's chicken seedlings account for about 20% and commercial chicken seedlings account for about 8%; at the same time, the “Probiotic 909” independently developed by the company is recognized by the market for its excellent production performance. Judging from the company's sales growth rate and product performance, we believe that the company's plan to sell a total of 1 billion birds in 2025 for commercial-generation broiler seedlings and probiotics in 909 is highly achievable, and the scale and market share can be expected to continue to increase.
The contraction in supply is expected to gradually materialize. The price of commercial surrogate seedlings may increase, and the number of domestic white feather broiler ancestral renewals decreased by 23% year-on-year in 2022. It has now spread to the generation of broiler breeding among birth parents. We expect that the current supply and demand gap for white feather broilers in 2024 is expected to drive the price of white feather chicken seedlings to enter a long cycle this year and next, or drive the price of the company's commercial chicken seedlings to rise. At the same time, the domestic ancestral renewal structure continues to deteriorate, and the company's breed advantage is expected to keep the price of chicken seedlings relatively high for their parents. The company's profit growth can be expected.
Risk warning: chicken price rise/cost falling short of expectations, sudden large-scale bird flu outbreaks, etc.