Huatong Co., Ltd. released its annual report for the year 23 and the quarterly report for the year 24: the company achieved revenue of 8.58 billion yuan in 2023, -9.24% over the same period, and realized net profit of -60 billion yuan. The previous period was +90 million yuan, and basic earnings per share were -1.03 billion yuan. 24Q1 achieved revenue of 2.0 billion yuan, +0.52% year-on-year, and realized net profit of 160 million yuan to mother, compared to -100 million yuan in the previous period.
The company's listing volume increased dramatically in '23, and production performance improved markedly. The company released 2.3027 million pigs in '23, a sharp increase of 91.13% year on year, and sold 657,000 pigs in 24Q1, +23% year over year, achieving sales revenue of 1.06 billion yuan, or +22.6% year over year. In '23, the company strengthened fine management, improved farming efficiency, reduced the death rate, and gradually reduced breeding costs. In 23Q1, the complete farming cost was 17.8 yuan/kg, and 23Q4 was reduced to 16.5 yuan/kg. Currently, the company can breed about 150,000 sows, PSY is around 25, the survival rate is 88%-89%, and the cost of weaned piglets is 370 - 380 yuan/head. Looking ahead to 24 years, on the one hand, we expect the company's sales volume to continue to grow. According to the company's equity incentive plan, the target sales value for 24 years is 5 million heads, and the trigger value is 4 million heads; on the other hand, the company is expected to continue to decline in 24 years. Currently, the company is actively promoting group breeding work. Currently, the proportion of French pigs accounts for 15-20%, and is expected to increase to 40-50% this year. We expect the company's cost to drop to 16 yuan/kg in 24 years. Finally, in addition to self-support, the company is also gradually expanding on an asset-light basis. This year, the share of maintenance is expected to account for 10% to 15% of the company's total sales.
Slaughter volume is growing steadily, and profit levels are relatively stable. The company slaughtered 4.4817 million pigs in '23, +29.38% year-on-year. Although pig prices were low in '23, and the breeding business may have experienced large losses, the profit performance of the company's slaughter business may have been relatively stable, thanks to the company's slaughter advantage and the advantage of being located in a high-priced area in Zhejiang. Looking ahead to 24 years, we expect the company to slaughter 6 million heads a year. At the same time, expansion to regions outside Zhejiang Province will be increased, new sales channels will be built, and the slaughter market share will be further increased.
Operating cash flow was positive in '23, and debt ratios rose slightly. Cash flow: Although the aquaculture business had significant losses, the net operating cash flow inflow was 530 million yuan in 23, and the net inflow of 0.2 billion yuan was reported for the first quarter in '24. Balance ratio: The balance ratio of the company in '23 and 24Q1 was 74.7% and 76.8%, respectively. We believe that as pig prices rise this year and the company's performance improves, the balance ratio may gradually decline. Productive biological assets: Productive biological assets in the company's annual report for '23 and quarterly reports for '24 were $275 million and $288 million, a slight decrease from the end of '22, or related to a decrease in the single-head book price of productive biological assets due to lower pig breeding costs.
Profit forecasting and investment advice. We expect that the number of pigs released by the company will continue to grow rapidly in '24. At the same time, pig prices may improve, and the company's performance is expected to improve significantly. Overall, we forecast an EPS of 1.43/1.70/3.01 yuan for 24-26, respectively. The company was given 20 to 25 times PE in 24 years, with a corresponding reasonable value range of 28.60 to 35.75 yuan, giving it a “superior to the market” rating.
Risk warning: In the event of an epidemic that exceeded expectations, pig prices fell far short of expectations, and the company's sales volume fell short of expectations