Huatong Meat(SZ:002840) Guoxin Securities·2024-07-12 00:01Investment Rating - The report maintains an "Outperform" rating for the company, indicating that its stock is expected to perform better than the market index by more than 10% [10][26]. Core Views - The company is expected to become a growth stock in the new cycle, with steady capacity growth and continuous cost improvements, providing ample room for growth and valuation recovery [7][26]. - The company is projected to achieve a net profit of 370 to 620 million yuan in Q2 2024, marking a significant turnaround from a loss of 252 million yuan in the same period last year [26][27]. - The company has a unique advantage in the Zhejiang region, where pig farming capacity is scarce, contributing to its status as a core asset in agricultural breeding [7][29]. Summary by Sections Financial Performance - The company forecasts a net profit loss of 95 to 120 million yuan for H1 2024, compared to a loss of 356 million yuan in the same period last year [3]. - In Q2 2024, the company expects to achieve a net profit of approximately 495 million yuan, a significant improvement from the previous year's loss [27]. Cost Management - The complete cost of pig farming is projected to decrease to nearly 16 yuan per kilogram in Q2 2024, down from 16.4 yuan per kilogram in Q1 2024, indicating a positive trend in cost management [27][26]. - The company is enhancing its breeding and assessment systems, which are gradually showing results in reducing farming costs [5]. Production Capacity - The company aims to increase its breeding stock to nearly 160,000 sows, with expectations of significant monthly increases starting in the second half of 2024, targeting an output of 3.5 million pigs in 2024, a nearly 50% increase from 2023 [5][7]. - The adjusted output forecasts for 2024-2026 are 3.5 million, 5 million, and 6 million pigs, respectively, reflecting a downward adjustment from previous estimates [7]. Competitive Advantages - The company possesses three core advantages: regional advantages leading to excess income, latecomer advantages providing additional earnings, and financial advantages ensuring growth in output [29]. - The company has diverse funding sources, including convertible bonds and government subsidies, which support its expansion plans [5][29].