Event: The company released its 2024 quarterly report. According to the company announcement, the company achieved total operating revenue of 14.308 billion yuan in 2024Q1, a year-on-year decrease of 8.9%, and net profit to mother of 1.272 billion yuan, a year-on-year decrease of 14.54%. In our performance outlook, we predicted a 15% year-on-year decline in the company's net profit in 24Q1, and the company's performance was in line with expectations.

Investment rating and valuation: Maintaining profit forecasts, the company's net profit from 2024 to 2026 is 53.4, 56.4, and 5.91 billion, respectively, with year-on-year increases of 6%, 6%, and 5%, respectively. The current stock price corresponding to 2024-2026 PE is 18/17/16x, respectively.

As a leading enterprise in the meat products industry, the company has a strong competitive advantage, low valuation, high dividend rate, and a dividend ratio corresponding to net profit in 2023 of 5.3%, maintaining a purchase rating.

In 24Q1, the operating profit of meat products increased 15.7% year on year, and the tonnage profit of meat products reached a record high. According to the company's announcement, in 2024Q1, the company's meat product revenue was 6.793 billion yuan, down 4.5% year on year. Looking at the split price, the sales volume of meat products in 24Q1 was 380,000 tons, down 4.9% year on year, and the unit price was 17.99 yuan/kg, up 0.42% year on year. Looking ahead to 24 years, the company will continue to push forward the network multiplication plan and actively develop professional channels such as high-end supermarkets, convenience store chains, and casual snack systems. As the external demand environment recovers, sales of meat products are expected to return to growth. On the profit side, the operating profit of 2024Q1 meat products was 1,887 million yuan, an increase of 15.7% over the previous year. The profit per ton was close to 5,000 yuan/ton, a record high, mainly due to the decline in cost side prices. Looking ahead to 24 years, on the one hand, it is expected that pig prices will be under little pressure, and the company reserves frozen meat at low pig prices. It is expected that the tonnage profit of the meat products business will remain at a high level.

The slaughter and farming business is under pressure, dragging down overall profit performance. According to the company announcement, 2024Q1's slaughter business achieved revenue of 6.598 billion yuan, a year-on-year decrease of 16.5%, including foreign transaction revenue of 5.899 billion yuan, a year-on-year decrease of 15.14%, and internal transfer revenue of 699 million yuan, a year-on-year decrease of 26.53%. Looking at the split price, fresh export sales volume in 24Q1 was 358,000 tons, a year-on-year decrease of 10%, mainly due to the high 23Q1 base and increased competition along with the layout of slaughter business by upstream farming companies. On the profit side, 24Q1 slaughter achieved an operating profit of 96 million yuan, a year-on-year decrease of 68.5%. Mainly due to pressure on the price of fresh products in 24Q1, which dragged down the price performance of frozen products, it is expected that there will be a certain loss in frozen products. The 24Q1 company accrued asset impairment losses of $107 million, compared to $95 million for the same period in '23. Looking ahead to '24, if pig prices pick up month-on-month in the second half of the year, frozen products are expected to boost slaughter profit performance, but considering competition and pig prices will not rise too high throughout the year, it is expected that there will still be some pressure on slaughter business profits throughout the year. In terms of breeding business, other business segments in 24Q1 achieved revenue of 2,083 billion yuan, a year-on-year decrease of 2%, and operating profit - 212 million. The pig and chicken businesses all had certain losses, mainly due to low pig prices and chicken prices. If the company controls the scale of the pig farming business in the future and continuously improves the technical level of breeding and reduces total costs, the profit of the breeding business is expected to improve sequentially.

Risk warning: A food safety incident, a sharp drop in pig prices led to the accrual of large inventory impairment losses.