The Company discloses its 2023 Annual Report and 2024 Quarterly Report. The company achieved operating income of 3,891 billion yuan in 2023, up 17.76% year on year, net profit of 401 million yuan, down 257.04% year on year, EPS-0.77 yuan, weighted average ROE of -9.07%, down 14.66 percentage points year on year. In the first quarter of 2024, the company achieved operating income of 1,082 billion yuan, a year-on-year increase of 20.82%, and attributable net profit of -0.04 billion yuan, an increase of 96.63% over the previous year, and net profit after deduction of 0.06 billion yuan, an increase of 105.47% over the previous year. As of the end of the first quarter of 2024, the company's balance ratio was 29.53%. It is at a low level in the industry and is financially sound.

While production volume is growing at a high rate, farming cost management continues to maintain excellent performance. The company sold 1,5204 million pigs in 2023 (external sales+sales to the group's internal slaughterers), with a year-on-year increase of 63.66%, of which 1.2 million heads were sold to external slaughter companies and 312,600 heads were sold to internal slaughter companies, achieving sales revenue of 2,092 billion yuan, an increase of 19.55% year-on-year, and gross profit margin of 2.61%, a year-on-year decrease of 19.61 percentage points. The company sold 496,900 pigs in the first quarter of 2024 (including 479,700 commercial pigs), an increase of 41% over the previous year, and achieved sales revenue of 809 million yuan, an increase of 29% over the previous year. By the end of the first quarter of 2024, the company was able to breed about 90,000 sows. The company's average PSY for the first quarter of 2024 was about 27.2 heads, the average meat ratio was about 2.57, and farming cost management maintained excellent performance.

The company slaughtered 1.7656 million pigs in 2023 (number of pigs slaughtered by surrogates plus number of pigs slaughtered on its own), with a year-on-year increase of 22.23%. Slaughter and food processing achieved sales revenue of 1,232 billion yuan, an increase of 38.06% year-on-year, and a gross profit margin of 3.90%, a year-on-year decrease of 13.18 percentage points.

Investment advice

We expect the company's 2024-2026 net profit to be 3.38/12.22/1.17 billion yuan, corresponding EPS of 0.64/2.33/2.23 yuan. The current stock price corresponding to 2024/2025 PE is 58 times/16 times, maintaining the “increase in holdings - B” rating.

Risk warning: risk of livestock and poultry epidemics, risk of natural disasters, risk of rising raw material prices, risk of poor transportation.