Huatong Meat(002840) 长江证券·2025-04-13 23:30Investment Rating - The investment rating for the company is "Buy" [14] Core Insights - Huadong Co., Ltd. is a leading player in the pig farming industry in Zhejiang Province, benefiting from high regional pig prices. The company focuses on developing a building-based farming model and improving management efficiency through breeding systems, feeding systems, and expanding contract farming models. The approval of the capital increase application by the China Securities Regulatory Commission in February 2025 is expected to support the company's continuous expansion of farming capacity, making it a key recommendation [4][8]. Company Overview - Established in 2001, Huadong Co., Ltd. is a dual leader in pig farming and slaughtering in Zhejiang Province, with main operations covering pig farming, slaughtering, and meat processing. The company has expanded into feed processing and poultry farming. Initially focused on slaughtering, it has since developed upstream and downstream operations, becoming a significant player in the pig industry chain [9][23]. Farming Model and Cost Management - The majority of Huadong's pig farming operations are located in Zhejiang Province, where the average selling price is higher than that of most competitors. In 2024, the pig price in Zhejiang is expected to exceed the national average by approximately 0.8 CNY/kg. The company has adopted a highly intensive building-based farming model to address environmental issues and continuously improve farming efficiency. As of December 2024, the company's latest total cost is approximately 15.2 CNY/kg, significantly improved from 18.6 CNY/kg in 2022 [10][68]. Capital Increase and Capacity Expansion - In November 2024, Huadong's capital increase application was approved, which will add a total of 448,000 pigs in new farming capacity and 180,000 tons in feed capacity. The company has successfully completed three rounds of refinancing since its listing, with each round leading to significant growth in operational scale. The capital increase is expected to facilitate high-quality expansion of farming capacity, with a target of approximately 3.2 million pigs to be slaughtered by 2025 [11][29]. Financial Performance - The company's revenue has shown fluctuations, with a rise from 7.706 billion CNY in 2019 to 9.452 billion CNY in 2022, followed by a slight decline in 2023. In the first three quarters of 2024, the revenue reached 6.485 billion CNY, a year-on-year increase of 5.21%. The net profit attributable to shareholders has also varied, with significant losses in 2021 and 2023 due to declining pig prices. However, the company anticipates a recovery in 2024, projecting a net profit of approximately 112.5 million CNY, a year-on-year increase of 118.6% [29][30].