Huaxi Securities: Pet economy spending steadily increases, optimistic about the pet service sector

According to the report released by Huaxi Securities, based on the "2025 Pet Industry White Paper," the scale of China's urban pet consumption market is expected to reach 300.2 billion yuan in 2024, with a year-on-year growth of 7.5%. According to the bank's calculations, the market space for urban pet consumption in China is expected to reach 478.7 billion yuan by 2030, corresponding to a CAGR of 6.9% from 2024 to 2030. Pet medical consumption is the fastest-growing segment with a growth rate of 13.9%, while the food sector still occupies the largest share at 52.8%. The bank expects that the non-food sector of China's pet industry will continue to increase its share in the future, with pet medical services growing the fastest. The main views of Huaxi Securities are as follows: Pet Industry Scale: Expected to reach 478.7 billion yuan by 2030, 7% CAGR According to the "2025 Pet Industry White Paper," the scale of China's urban pet consumption market is expected to reach 300.2 billion yuan in 2024, with a year-on-year growth of 7.5%. Referring to overseas developments, the bank analyzes that (1) the short-term driving factors for the industry are mainly: the pace of supply-side expansion driven by PE financing, income growth, and the periodic speculation of pet prices (such as Tibetan mastiffs, pet cats, etc.), while the medium- and long-term factors include per capita GDP, marriage and birth rates, aging population, and other economic and demographic impacts. According to data from the College of Veterinary Medicine at China Agricultural University, the pet industry is expected to experience rapid development when per capita GDP exceeds 3,000 USD. (2) The duration of high growth in the industry, growth rate, and the stable growth rate and profitability after the slowdown: 1) The high growth of Japan's pet industry lasted for about 14 years, with a CAGR of 15.8% from 1978 to 1992, during which Japan's birth rate fell from 14.9% to 9.8%; according to statistics from the Ministry of Health, Labour and Welfare, the number of registered dogs in Japan increased from 1.91 million in 1960 to 6.88 million in 2009, with a CAGR of 2.6%. After reaching a peak in 2008, the number of pets began to decline. 2) The high growth phase of the U.S. pet industry occurred from 1956 to 1990, giving rise to the largest pet chain supermarkets PetSmart (1987) and Petco (1965), as well as the largest chain pet hospital VCA (1986); since the 1990s, growth has slowed to single-digit rates (5.9%), but accelerated growth (10.4%) was seen from 2016 to 2023 driven by e-commerce and pet nutrition products. According to the bank's calculations, the market space for urban pet consumption in China is expected to reach 478.7 billion yuan by 2030, corresponding to a CAGR of 6.9% from 2024 to 2030. Pet Industry Segmentation: Food accounts for more than half, medical consumption grows the fastest In 2024, pet food consumption accounts for approximately 52.8% of total urban pet consumption in China, while pet supplies/pet medical/pet services (mainly pet grooming) account for 12.4%/28.0%/6.8%, respectively. From 2019 to 2024, the CAGR for pet food/supplies/pet medical/pet services consumption is expected to be 4.1%/7.8%/13.9%/4.2%, with pet medical consumption growing the fastest, while the growth of pet services is slowing due to the impact of primary market financing on expansion growth and the impact of periodic consumption downgrade In comparison to overseas markets, in 2024, the shares of the U.S. pet food/pet care and products/pet supplies, live animals, over-the-counter drugs/other services are 43%/22%/26%/9%, with CAGRs from 2019 to 2024 of 9.4%/2.2%/12.9%/4.0%, respectively, with the fastest growth in pet supplies, live animals, and over-the-counter drugs. In Japan, the shares for 2023 are 44.9% for live animals and services, 37.7% for pet food, and 17.4% for pet supplies. The bank expects that the non-food segment of China's pet industry will continue to increase its share in the future, with pet medical services growing the fastest. Beneficiary Targets (1) Pet chain hospitals: Ruipuhua; (2) Pet supplies: Yiyi Co., Daqian Ecology, Tianyuan Pet; (3) Pet food: Guobao Pet, Zhongchong Co., Peidi Co., Lusi Co., Baihe Co., Yuanfei Pet, etc. Risk Warning: Market competition risk; brand building not meeting expectations; industry growth slowdown