China Galaxy Securities: 25 years of relatively stable pig prices, focusing on opportunities for balanced offensive and defensive layouts in pig farming

According to the report from China Galaxy Securities, there is a continuous emphasis on the balanced layout opportunities in the pig farming industry. Considering the value of breeding sows and farming efficiency, pig prices in 2025 may show a downward trend year-on-year, with relatively stable operation within the year. Coupled with the unexpected profits brought by declining costs, the focus should be on high-quality pig enterprises with significant marginal cost changes and good funding conditions. The pet food industry is in a growth phase, with a rising market share of quality enterprises. The price of yellow chickens has a certain correlation with pig prices, and considering the low supply side, there is potential for price increases in the future. Attention can be paid to the post-cycle of the breeding chain, including the leading feed company HAID GROUP (002311.SZ) and animal vaccine-related enterprises. The main points from China Galaxy Securities are as follows: June CPI turned positive year-on-year, agricultural trade deficit decreased by 19%. In June, China's CPI increased by 0.1% year-on-year, with food items down by 0.3%, and pork prices down by 8.5% year-on-year; the CPI decreased by 0.1% month-on-month, with food items down by 0.4%, and pork prices down by 1.2% month-on-month. In June, China's agricultural product import value was USD 18.531 billion, up by 1.9% year-on-year, while export value was USD 8.126 billion, down by 6.28% year-on-year, resulting in a trade deficit of USD 10.405 billion, up by 9.36% year-on-year. July agricultural index outperformed the CSI 300. From early July to the 22nd, the agriculture, forestry, animal husbandry, and fishery index rose by 7.35%, while the CSI 300 increased by 4.65% during the same period. Comparing various sub-industry indices, the breeding industry (+11.2%) and fishery (+6.9%) had relatively high increases, while feed (+0.95%) and planting industry (+3.88%) performed relatively poorly. July profits from self-breeding and self-raising of pigs improved month-on-month. Pig prices rebounded from the low point of 24.1.17, reaching a year-high of 21.06 yuan/kg in mid-August, and then fluctuated downwards. On July 16, 2025, the pig price was 14.96 yuan/kg, down 8% from the end of 2024. On July 18, the profits from self-breeding and self-raising, and purchased piglets were 90.89 yuan/head and -18.66 yuan/head, respectively. At the end of May, the number of breeding sows in China was 40.42 million, up by 0.1% month-on-month. Regarding the pig price trend in 2025, we believe the average price will operate relatively steadily throughout the year, with differences arising from the continuous optimization of total costs by excellent pig enterprises, leading to unexpected farming profits. Additionally, the rhythm of capacity changes in pig enterprises since 2025, the industry's breeding situation, and slaughter weights may also lead to unexpected changes that deserve close attention. June pet food export volume and price both fell, with a slight increase in H1 export value. In June, China's pet food export value was 824 million yuan, down by 20.22% year-on-year. The export volume was 28,800 tons, down by 13.76% year-on-year; the average export price was 28.6 yuan/kg, down by 7.49% year-on-year. From January to June 2025, the cumulative export value was 4.999 billion yuan, up by 0.4% year-on-year. Breaking down volume and price, the export volume was 167,900 tons, up by 5.7% year-on-year; the average export price was 29.77 yuan/kg, down by 5.01% year-on-year Investment Recommendations We continue to emphasize the opportunities for a balanced offensive and defensive layout in the pig farming industry. Based on the value of breeding sows and farming efficiency, pig prices in 2025 may show a downward trend year-on-year, with relatively stable operation throughout the year. Coupled with the profit exceeding expectations due to declining costs, we focus on high-quality pig enterprises with significant marginal cost changes and good funding conditions. 2) The pet food industry is in a growth phase, with the market share of quality enterprises showing an upward trend. 3) The price of yellow chickens has a certain correlation with pig prices, and considering the low supply side, there is potential for price increases in the future. 4) Attention can be paid to the post-cycle of the breeding chain, including the leading feed company HAID GROUP and animal vaccine-related enterprises. Risk Warning Risks of livestock and poultry prices not meeting expectations, risks of animal epidemics, risks of raw material price fluctuations, policy risks, risks of natural disasters, etc