Guohai Securities: The "Matthew Effect" in the animal protection industry intensifies, and pet pharmaceuticals and overseas expansion are expected to open up medium to long-term growth space

According to Zhitong Finance APP, Guohai Securities released a research report stating that the domestic animal health industry is undergoing structural adjustments, with the industry's sales growth rate slowing to 3.7% from 2020 to 2023, and gross profit declining by 3.2%. In the future, leading companies in the industry are expected to gain a larger market share through a rich product matrix, continuous R&D investment, and improved after-sales service. Pet medical care (with a scale of 84 billion yuan) and overseas expansion (such as Haizheng Animal Health's "Hailuowang" exports to Vietnam) will become new growth poles for the industry, with the export of innovative pet drugs becoming one of the important breakthroughs for domestic animal health companies going abroad.

Guohai Securities' main points are as follows:

Domestic animal health industry growth slows, "Matthew Effect" intensifies

According to data released by the China Veterinary Drug Association, from 2019 to 2023, the sales of veterinary drug companies in China increased from 50.395 billion yuan to 69.651 billion yuan, with a GAGR of 8.43%. In 2023, sales of veterinary biological products and veterinary chemical drugs accounted for 23.37% and 76.63%, respectively. After 2021, due to intensified competition and other factors, the "involution" in the animal health industry has intensified, leading to a slowdown in market growth. From 2020 to 2023, the sales of domestic animal health companies increased from 62.095 billion yuan to 69.651 billion yuan, while the industry's average gross profit decreased from 21.998 billion yuan to 21.297 billion yuan, facing the risk of declining profitability in both the biological and chemical drug sectors. Due to severe product homogeneity, a "price war" has emerged within the industry. From 2020 to the first half of 2023, the price of pig foot-and-mouth disease vaccine from JINYU decreased from 1.45 yuan/ml to 0.98 yuan/ml, a decline of 32.41%. Based on the operating performance of listed animal health companies from 2021 to 2024, the industry's "Matthew Effect" has intensified, putting significant operational pressure on small and medium-sized animal health companies. In the future, leading companies in the industry are expected to gain a larger market share through a rich product matrix, continuous R&D investment, and improved after-sales service.

The industry's post-cycle attributes weaken, returning to R&D-driven essence

In 2024, the average profit per head under the self-breeding model is expected to be 170 yuan, a significant improvement compared to 2023. In 2024, leading pig breeding companies such as Muyuan Foods are expected to achieve a net profit attributable to shareholders of 17.881 billion yuan, a year-on-year increase of 519.42%; Wens Foodstuff Group is expected to achieve a net profit attributable to shareholders of 9.230 billion yuan, a year-on-year increase of 244.46%. In contrast, most listed animal health companies are expected to see their performance decline in 2024, with some companies even experiencing continuous losses. This abnormal phenomenon in the performance of animal health companies is mainly due to disorderly competition leading to a rapid deterioration of profitability, weakening the industry's "post-cycle" attributes. Some listed animal health companies have achieved counter-cyclical revenue growth through "integration" strategies. At the same time, the importance of product innovation and technological innovation has been further highlighted.

Pet medicines and overseas expansion are expected to open up medium to long-term growth space for the industry

According to data disclosed in RINGPU's announcement, the pet medical consumption scale in 2024 is expected to be about 84 billion yuan, accounting for 28% (with diagnosis and treatment accounting for 15.8% and drugs and vaccines accounting for 12.2%), making it the second largest sub-industry after pet food. As pet owners' awareness of pet health increases, the demand for disease prevention, healthcare, and treatment is expected to rise, and the domestic pet medical industry is likely to maintain rapid growth in the future In 2023, the sales of pet and other biological products by domestic animal health companies accounted for only 6.0% of the domestic market size. With the launch of domestically produced "cat trivalent" vaccines and deworming drugs, the import substitution of pet medicines is expected to accelerate. China's animal health product exports have primarily consisted of traditional raw materials and formulations. On July 1, 2025, Haizheng Animal Health's star product "Hailuowang" will be shipped to the Vietnamese market for the first time, marking a substantial breakthrough for domestically produced pet medicines going abroad. In 2024, significant breakthroughs in the research and development of innovative pet medicines in China were achieved, with Lishutini, developed and submitted by Gegewu Biotechnology and Lilan Animal Health, receiving a Class I new veterinary drug certificate. This drug is the third veterinary drug globally targeting JAK kinase. In the future, the export of innovative pet medicines will become one of the important breakthroughs for domestic animal health companies going abroad.

Recommended Companies

RINGPU, Kexin Biotechnology, Huisheng Biotechnology, PULIKE, JINYU, Zhongmu Co., Ltd., Jinhe Biotechnology, Shen Lian Biomedical

Risk Warning

Epidemic risks, significant decline in pig prices, intensified industry competition, research and development innovation falling short of expectations, escalation of trade disputes, industry capacity clearing slower than expected, and key focus on listed companies' performance falling short of expectations