Yellow feather chicken's leading position is stable, and its market share is increasing year by year. The company is the second largest broiler breeding enterprise in the country and the largest yellow feather broiler in East China. In 2023, the number of yellow feather broilers sold by the company was 457 million, +12.2% year-on-year, with a market share of 12.71%, and a year-on-year market share of +1.84ppt.
Production capacity has dropped to a historic low, and we are waiting for the yellow chicken boom to pick up. On the supply side, the maternity register has fallen to an 18-year low, indicating that the industry's production capacity continues to decline. On the demand side, the short-term increase in food and beverage demand favors yellow chicken consumption. There is still room for an increase in poultry consumption per capita in the long term. On the price side, deterministic reduction in supply is compounded by rising pig prices, and the price of yellow chicken may rise or fall easily.
Yellow chicken has a significant cost advantage, and they are optimistic about the growth space brought about by offsite expansion and industrial chain extension. 1) Cost leadership: The company's breeding costs are lower than those of the industry, mainly because feed procurement has price advantages and the high average farming scale is diluted, and only surrogacy costs. 2) Offsite expansion: With the gradual improvement of the regional layout in South China and Southwest China, the company is expected to replicate the competitive advantages of mature markets and further increase its market share.
3) Industrial chain extension: The company has set up slaughter business since 2014, and has now initially covered the three major urban agglomerations of the Yangtze River Delta, Pearl River Delta, and Beijing-Tianjin-Hebei, and is expected to collaborate with the farming business.
The number of pigs released continues to grow rapidly, costs are expected to continue to fall, and profits can be expected. The company's pig business is still in a stage of rapid expansion, and production volume is expected to continue to rise. Breeding costs are expected to improve markedly as feed prices decline, production performance increases, and capacity utilization. At the same time, the company's pig production capacity layout is close to traditional pork consumption areas, and the average sales price is higher than that of comparable listed companies, so the pig business can be expected to be profitable.
Investment advice: The company is expected to achieve revenue of 180.54/201.06/21.189 billion yuan in 24-26, +17.58%/+11.36%/+5.39%; net profit to mother of 11.72/16.14/ 997 million yuan, +368.02%/+37.69%/-38.23%, corresponding EPS of 1.42/1.95/1.20 yuan. Considering that chicken and pig prices are expected to be high in 24-25, the cost advantage of the company's yellow chicken business is remarkable, and the release of pigs is expected to increase. It will fully benefit from the recovery in industry sentiment. It will be covered for the first time, and it will be covered for the first time, giving it a “buy” rating.
Risk warning: Risk of a sharp drop in chicken and pig prices, risk of animal disease, risk of a sharp rise in the price of feed ingredients, food safety risks, etc.