Event: The company released its 2023 annual report and 2024 quarterly report. In 2023, the company's total revenue was 6.998 billion yuan, down 0.14% year on year, and net profit to mother was 188 million yuan, -243.94% year-on-year. After deducting non-net profit - $147 million, a year-on-year decrease of 226.51%. 2023Q4 achieved total revenue of 1,698 billion yuan, +0.16% year over year, and net profit to mother - 102 million yuan, +8.34% year over year. 2024Q1 achieved total revenue of 1,361 billion yuan, +0.16% year over year, and net profit to mother of 6.59 million yuan, +17.40% year over year.
Revenue is resilient, and profits have declined due to extreme weather and cyclical fluctuations. The changes in the company's performance in 2023 are mainly due to ① the continuous pressure on the feed industry, large fluctuations in feed raw material prices, losses in the downstream aquaculture industry, and increased operating costs and capital turnover pressure; ② the specialty aquaculture business was affected by extreme high spring and summer temperatures in the first quarter of 2023, and high seeding volume in the past two years but not fully supported by the construction of breeding bases. Currently, the overall farming density is high, which objectively affects the overall fishing rhythm; ③ the macroeconomic environment and the price trend in the eel sales market was weak during the reporting period.
Eel farming is growing rapidly, improving the profit structure. Affected by factors such as climate change, farming intensity and market conditions, the company released about 3,461 tons of eels in 2023, a year-on-year decrease of about 43.28%. With the effective progress of construction of various breeding bases, farming density has gradually returned to normal, and eel feeding rates and growth are becoming more and more normal. Since the fourth quarter, the company's eel output has increased significantly compared to the previous three quarters, and the amount of eels released in the first quarter of 2024 also achieved a month-on-month increase. As the scale of the company's eel production expanded, the share of gross profit increased rapidly, or grew into the main source of the company's profit elasticity. The company's eel farming profits are flexible or gradually released.
The incentive to increase holdings+employee share ownership plans shows confidence. From February 1, 2023 to July 31, 2023, Mr. Chen Qingtang, the controlling shareholder and actual controller of the company, increased his holdings by more than RMB 50 million. Furthermore, on March 9, 2024, the company completed the 2023 employee stock ownership plan to complete the stock purchase. The company's 2023 employee stock ownership plan has purchased a total of 20,731,400 shares of the company's stock through centralized bidding transactions in the secondary market, accounting for 4.54% of the company's current total share capital. The average transaction price is 15.78 yuan/share, and the total transaction amount is 327 million yuan.
Profit forecasting and investment advice. The company's 2024-2026 EPS is expected to be 0.66 yuan, 1.13 yuan, and 1.81 yuan respectively, and the corresponding dynamic PE is 22 times, 13 times, and 8 times, respectively. Considering that the company is rapidly starting up in eel, improving its profit structure, and is in a stage of rapid growth, the company was given 30 times PE in 2024, corresponding to a target price of 19.8 yuan, maintaining a “buy” rating.
Risk warning: Aquaculture growth rate falls short of expectations, risk of raw material price fluctuations, downstream demand falls short of expectations.