Incident: The company released its 2024 quarterly report. In 2024Q1, the company achieved revenue of 687 million yuan, -24.75%, and +21.4% month-on-month; realized net profit to mother of 110 million yuan, -65.16% year over year, turning a significant loss into profit from month to month.
Comment:
The recovery in seedling prices has led to improved performance: The production performance of the company's Li Feng breed white feather broiler is at the leading level in the industry, both parent generation and commercial generation, and has a strong competitive advantage. In the first quarter of 2024, the company sold 130 million white feather broiler seedlings, -13.5% year-on-month, -8.2% month-on-month. The average sales price was 4.2 yuan/piece, -19.5% year-on-year, and +42.3% month-on-month.
The company's chicken seedlings sales declined in the first quarter compared to the same period, mainly due to restrictions on the introduction of chicken from ancestral generations since May 2022, which were transmitted to the commercial generation, and the overall supply of domestic white feather broiler seedlings shrunk. Judging from the estimated data of the Animal Husbandry Association, domestic sales of commercial chicken seedlings were -3.3% in Q1, of which -15.4% year-on-year in January. The contraction in domestic supply led to a recovery in the price of chicken seedlings. The company's main business was sales of parent generation and commercial chicken seedlings, and the 24Q1 performance benefited significantly.
The advantages of breeding lines are strong, and pig production capacity is gradually being released: the company has excellent production performance through the self-developed variety Probiotic 909, which supports the three series, and sales are rising steadily. In the first quarter of 2024, the company sold 22.76 million probiotic 909 chicken seedlings, -2.6% YoY, +66.7% month-on-month, with an average sales price of 1.28 yuan/pc. As the sales scale of the company's chicken seedlings continues to increase, it is estimated that the sales volume of commercial chicken seedlings will reach 600 million in 2024, and the annual sales volume of commercial white feather broiler seedlings and “Probiotic 909” chicken seedlings is highly achievable in 2025. In terms of pigs, 24Q1 sold 3,175 breeding pigs, an increase of 709.95% over the previous year. The company's breeding capacity will continue to be released in the future, and the two-wheel drive for pigs and chickens will expand profit margins.
Maintaining the “purchase” rating: With the previous production capacity gap in place, the white feather broiler boom has arrived in 2024, but frozen product inventories continue to be high, which has a strong effect on chicken prices. Therefore, the net profit forecast for 2024-25 was lowered to 6.16 billion yuan and 640 million yuan (down 65.41% and 57.92% from the previous forecast, respectively), and the net profit forecast for the additional 26 years was 678 million yuan, equivalent to EPS of 0.56/0.0.61 yuan. The current P/E corresponding to the stock price is 17/16/15 “maintained” Buy” Ratings .
Risk warning: the risk of animal diseases, the risk of fluctuations in the price of feed ingredients, and the risk of large fluctuations in the price of chicken seedlings.