LIHUA(SZ:300761) Xin Lang Cai Jing·2025-12-31 10:17Core Viewpoint - Lihua Co., Ltd. is facing significant challenges due to continuous share reductions by its actual controller and declining profitability amid high debt levels and falling poultry prices [1][2][3] Share Reduction - The actual controller Cheng Lili and Tianming Agriculture plan to reduce their holdings by up to 1.7% within three months, potentially cashing out approximately 289 million yuan based on the closing price of 20.3 yuan [2] - Cheng Lili and Tianming Agriculture have been consistently reducing their stakes throughout 2023, having previously sold 2.91% of shares for about 431 million yuan from July to October [2][3] Financial Performance - In the first three quarters of 2023, Lihua's revenue increased by 6.38% to 13.493 billion yuan, but net profit plummeted by 75.27% to 287 million yuan, resulting in a net profit margin of only 2.03% [3][4] - The company’s main business involves the breeding and processing of yellow feathered chickens, with chicken revenue accounting for 82% and pig revenue for about 17% of total income [3] Cost and Pricing Issues - The average selling price of chickens has fluctuated, reaching a low of 9.77 yuan per kilogram in July and recovering to 12.18 yuan in November, while the cost of raising chickens was approximately 11.4 yuan [3][4] - The cost of raising pigs was about 12.6 yuan per kilogram, with prices falling below cost since October 2024, indicating a challenging market environment [3][4] Debt and Cash Flow - Lihua has significantly increased its fixed assets from 2.104 billion yuan in 2019 to 7.561 billion yuan in 2024, but its interest-bearing debt has also surged to 2.982 billion yuan, with short-term debt reaching 2.944 billion yuan [6][7] - The company’s cash flow from operating activities has been positive, but investment outflows have exceeded inflows, leading to insufficient cash to cover short-term debts [7] Profitability Challenges - The company has experienced substantial fluctuations in profitability, with a gross profit margin of only 9.94% in the first three quarters of 2023, while combined sales, management, and financial expenses accounted for 7.03% [8] - The ongoing downtrend in livestock prices, coupled with high operational costs, has severely impacted Lihua's profitability, necessitating a potential turnaround in poultry prices for recovery [8]