Huatong (002840) issued an announcement on January 5, 2022: Guoxin Securities Lu Jiarui Li Ruinan, Wen's (Shenzhen) Equity Investment Management Co., Ltd. Chen Lu Zhu Yuxiang, China Europe Fund Hu Wancheng, China Europe Fund Feng Zili, Taixin Fund Cong Yuan, Caitong Fund Wang Zhaoning, Yangtze River Pension Li Ze, Shen Wanling Xinwang Yu, Zhong Geng Fund Zhang Weishun, Ruijun assets Tan Yiwei, Life Asset Ma Jintao, Qianhai Open Source Tian Wei, Qianhai Open Source Tian Wei Rui Yi invests in Wang Huilin, Jingshun Great Wall Tang Yan, Boshi Fund Mei Si Zhe, South Fund Shao Kang, Soochow Fund Zheng Weiyu, Shanghai Huanyi Song Chuyi, Huabao Fund Lu Heng, Everbright Prudential Fund Wang Kai investigated our company on January 4, 2022.

Q: could you tell me the main situation of pig farming in the company?

Answer: if all the pig farms are completed and fully put into production, it is estimated that the annual output of commercial pigs will reach 2.6 million. The company has 19 new pig farms in Zhejiang Province, of which 18 have been basically completed. The focus of the company's pig farming is to control the risk of large-scale infectious diseases, especially to prevent the occurrence of classical swine fever in Africa.

Q: what is the current stock of fattening pigs in the company?

A: at present, there are about 300000 fattening pigs in stock.

Q: how many pigs are expected to be produced by the company in 2022 and 2023?

A: the company aims to produce about 1.2 million pigs in 2022 and 2.3 million pigs in 2023.

Q: how much does it cost for the company to fattening pigs?

A: at present, the cost of self-breeding and self-rearing fattening pigs is 17018 yuan / kg, which is expected to drop to 15-16 yuan / kg in 2022. The main factors contributing to the decline of breeding costs in the future are as follows: the decrease of the cost of breeding pigs, the decrease of the cost of amortization of full production of pigs, the decrease of raw material cost after the self-built feed factory is put into operation, and the increase of sow birth rate. measures such as adjusting feed formula to control feed-meat ratio and other measures to reduce breeding cost.

Q: does the feed produced by the company have a regional cost advantage?

A: Zhejiang Province is a coastal province, the company is located near the import and export seaport, Yiwu small commodity market developed transportation and logistics advantages, there are thousands of return containers every day, so that the procurement and transportation cost of feed raw materials is relatively low.

Q: what is the sales survival rate of the company from piglets to fat pigs, and how to do a good job in epidemic prevention and control?

A: the survival rate of the company's pig farming from birth to sale is more than 88%. It has the following advantages in epidemic prevention and control, especially in the prevention of African classical swine fever: first of all, all the pig farms of the company were put into production or newly built after the outbreak of classical swine fever in Africa, so the company has the advantage of backwardness in the location and design of pig farms, and the prevention and control measures for African classical swine fever are based on the excellent experience of other enterprises. Secondly, the overall epidemic prevention environment in Zhejiang Province is relatively good, the pig breeding density is relatively low, the geographical environment belongs to hilly terrain, and there is a natural epidemic prevention barrier, which can more effectively prevent the spread of epidemic disease through dust than in plain areas. the company's pig farm has an advantage over African classical swine fever prevention and control in the specific site selection environment; once again, the company has formulated strict and advanced epidemic prevention and control measures, and has been effectively implemented.

Q: what are the financing channels for the company's project construction?

Answer: there are mainly self-owned funds, convertible bond financing, Zhejiang Rural Revitalization Investment Fund, bank project loans and liquidity loans, and so on. The follow-up company will also raise about 920 million yuan through the targeted issuance of additional stocks. Apart from the 200 million yuan planned for the new 40, 000-ton meat processing project, the rest of the funds will be used to supplement liquidity.

Q: are all the above increases subscribed by major shareholders?

A: the above fixed increase plan is fully subscribed by Shanghai Huajian Food Technology Co., Ltd., a wholly-owned subsidiary of Huatong Group Co., Ltd., and the final implementation of the fixed increase needs to be approved by the China Securities Regulatory Commission.

Q: how can the breeding talents needed by so many farms in the company be satisfied?

A: the company has been recruiting aquaculture personnel since 2017, mainly through external recruitment within the industry and internal training. at present, the required aquaculture personnel are basically in place. At the same time, because the company adopts the modern pig farming mode with a high degree of automation, the demand for breeding staff has decreased greatly compared with the traditional pig farming model.

Q: what is the company's target slaughtering output in 2022? What are the main drivers of the company's production increase?

A: the company's target for slaughtering pigs in 2022 is 5 million. First of all, in the early stage, China experienced the impact of African classical swine fever and COVID-19 epidemic, as well as the sustained high operation of pig prices, which led to a sharp decline in consumer demand. In the coming period of time, with the gradual recovery of consumer confidence, it is expected that the consumption demand of pork will naturally pick up; secondly, the company will increase sales to the chilled meat market in 2022; again, the company will plan to continue to layout slaughterhouses in or around Zhejiang Province to seize the market.

Q: how is the company's comprehensive smart energy project going?

A: the company has set up a platform company in cooperation with Zhejiang New Energy Co., Ltd., a national power investment group, in which the company holds 49% of the shares and the other party holds 51% of the shares. It is expected that first of all, photovoltaic power generation projects will be done on the roof of the company's farm, on the one hand, through the preferential price of electricity, the company can reduce production costs and improve product competitiveness; on the other hand, it can also increase the company's revenue through the cooperation of the two sides to develop other comprehensive smart energy projects.

Q: how do companies attract and retain talent from outside industries?

A: first of all, the core posts of pig farming in the company are held by employees who have been precipitated and trained within the company for many years. The new employees are first employed in non-core posts. After long-term investigation and thinking that those who have the ability will gradually be transferred to the core posts. Secondly, the company has established a set of relatively perfect performance appraisal mechanism to constantly stimulate everyone's enthusiasm for work. Thirdly, in operation, the company's business covers four major industries: feed, breeding, slaughtering and deep processing of meat products, and the company can reduce the fluctuating impact of the pig cycle on the company's performance through the complementarity of different industries in the industrial chain. and this also makes the company has a greater market competitive advantage, making the overall operation of the company relatively stable, and will be more attractive to talents. At the same time, Zhejiang Province is a more economically developed region in China, and it will be more attractive to talents than other regions under the influence of this geo-economic factors.

Q: how to plan the future development direction of the company?

A: in the future, we will continue to take slaughtering as the main industry, cultivate both ends of the market, strengthen breeding business, increase investment in meat processing business, give full play to the advantages of the company's industrial chain, and improve the competitiveness of the industry.

Huatong's main business: covering four major links: "feed processing, livestock and poultry breeding, livestock and poultry slaughtering processing, deep processing of meat products". The products sold to the outside mainly include feed, fresh pork, fresh poultry, Jinhua ham, stewed products and so on.

According to the third quarterly report of Huatong shares in 2021, the company's main income was 6.245 billion yuan, up 1.67% from the same period last year; the net profit was 46.2891 million yuan, down 49.04% from the same period last year; and the non-net profit was-44.8377 million yuan, down 191.62% from the same period last year. Among them, in the third quarter of 2021, the company's main income in a single quarter was 1.63 billion yuan, down 23.25% from the same period last year; net profit in a single quarter was-104.291 million yuan, down 767.24% from the same period last year The non-net profit per quarter was-104.5701 million yuan, down 3535.75% from the same period last year; the debt ratio was 63.51%, the investment income was 46.9453 million yuan, the financial expense was 66.0624 million yuan, and the gross profit margin was 3.47%.

The stock has been rated by two agencies and two buy ratings in the last 90 days; the average institutional target price has been 19.61 in the past 90 days; according to the Securities Star valuation analysis tool, Huatong (002840) good company has a rating of 3 stars, a good price rating of 2.5 stars, and a comprehensive valuation rating of 3 stars. (rating range: 1-5 stars, up to 5 stars)