Huatong Meat(SZ:002840) Tebon Securities·2024-02-04 16:00Investment Rating - The report initiates coverage on Huadong Co., Ltd. (002840.SZ) with a "Buy" rating [3][7]. Core Views - Huadong Co., Ltd. is positioned as a dual leader in livestock farming and slaughtering in Zhejiang Province, benefiting from integrated operations and government policies supporting stable production [5][19]. - The company has experienced significant growth in pig farming, with a 776% year-on-year increase in pig sales, achieving over 1 million pigs slaughtered in 2022 [5][6]. - The report anticipates a clear growth path for the company's pig farming business, with expected sales of 4-5 million pigs in 2024, representing a year-on-year increase of approximately 95% [6][7]. Summary by Sections 1. Integrated Business Model - Huadong Co., Ltd. operates an integrated business model encompassing feed production, livestock farming, slaughtering, and meat processing, establishing itself as a dual leader in the industry [5][19]. - The company has built modern pig farming facilities in Zhejiang, achieving a slaughter volume of 3.464 million pigs in 2022, with a market share exceeding 30% in the province [5][19]. 2. Growth Strategy and Market Position - The company benefits from higher pig prices in Zhejiang, which are consistently above the national average, with a price premium of 0.85 CNY/kg as of early 2023 [6]. - Huadong Co., Ltd. has a clear expansion strategy, with a current production capacity of 3 million pigs and plans for further growth in both domestic and external markets [6][7]. 3. Financial Performance and Projections - The report projects revenues of 9.928 billion CNY, 16.865 billion CNY, and 20.154 billion CNY for 2023, 2024, and 2025, respectively, with net profits expected to turn positive by 2024 [7][26]. - The company's current stock price corresponds to a PE ratio of 16.59 for 2023 and 12.28 for 2024, indicating potential for growth [7][26]. 4. Cost Management and Efficiency - Huadong Co., Ltd. has successfully reduced breeding costs, with total costs dropping to 16-17 CNY/kg by Q3 2023, down from 12% in 2022 [6]. - The company has implemented effective biosecurity measures, achieving a pig survival rate of 87-88% in 2023, which is above industry standards [6].