Guosheng Securities: The production capacity of enoki mushrooms returns rationally, and the profitability of button mushrooms continues

According to the Zhitong Finance APP, Guosheng Securities released a research report stating that in recent years, the oversupply of enoki mushrooms has led to severe losses in the industry. To cope with the continued low prices of enoki mushrooms, XUERONG has taken the lead in actively reducing production capacity, estimating that the company's current annualized capacity is 440,000 tons, a year-on-year decrease of 4%. In Q1 2025, the company's capacity utilization rate dropped to 63.82%, a decrease of 9 percentage points compared to 2024. Regarding white button mushrooms, due to high initial investment and production management difficulties, the entry barrier for white button mushrooms is relatively high. From the perspective of Zhongxing Junye's white button mushroom gross profit margin, it only fell below 30% from 2019 to 2022, while remaining above 30% in other years, demonstrating outstanding profitability and the potential for sustainability. The main points of Guosheng Securities are as follows: Factory-produced edible mushroom output hits a new high, optimistic about the increase in mushroom demand under the big food perspective The central government's No. 1 document in 2025 proposed "building a diversified food supply system," with edible mushrooms being an important carrier of nutrition and health under the background of "big food perspective" and "big health." In 2023, the national edible mushroom output reached 43.342 million tons, a year-on-year increase of 2.6%, with a 10-year CAGR of 3.2%; the total output value was 396.56 billion yuan, a year-on-year increase of 2.0%, with a 10-year CAGR of 7.0%. The total output of factory-produced edible mushrooms in the country in 2023 was 4.0916 million tons, a year-on-year increase of 43.23%, with a 10-year CAGR of 7.2%. The edible mushrooms produced through factory methods both domestically and internationally are mainly low to medium temperature varieties, with enoki mushrooms currently holding the highest proportion at 44%. Accelerated reshuffling, optimized structure The factory production of edible mushrooms in China began in the 1990s. From 2006 to 2010, after more than a decade of exploration and accumulation, the technology for factory production of edible mushrooms gradually improved. Driven by profits, the number of production enterprises surged from 47 in 2006 to 788 in 2012. After 2012, as China's multi-level capital market began to develop, factory production enterprises for edible mushrooms started to grow with the help of capital, with some companies going public. The maturity of technology in the edible mushroom industry and the low entry barriers led to an influx of capital, resulting in oversupply and declining profitability, particularly for enoki mushrooms, whose gross profit margin fluctuated from over 40% in 2011 to 4-5% in 2024. With the exit of small and micro edible mushroom enterprises, large companies such as XUERONG, Zhongxing Junye, and Hualv Biological have consolidated their leading positions. From 2020 to 2024, the industry's CR5 remained stable at 33%-36%, indicating a basically stable industry structure. Traditional single products: Rational return of enoki mushroom capacity, continued profitability of white button mushrooms Enoki mushrooms: In recent years, the oversupply of enoki mushrooms has led to severe losses in the industry. To cope with the continued low prices of enoki mushrooms, XUERONG has taken the lead in actively reducing production capacity, estimating that the company's current annualized capacity is 440,000 tons, a year-on-year decrease of 4%; in Q1 2025, the company's capacity utilization rate dropped to 63.82%, a decrease of 9 percentage points compared to 2024. Additionally, Zhongxing Junye has also reduced its capacity by 13.46% to 675 tons per day. Considering the cost advantages of leading companies, tail-end enterprises may have larger capacity adjustments White Button Mushroom: Since 2020, the daily production of white button mushrooms has steadily declined, with a daily output of 916.7 tons in 2023, a year-on-year decrease of 1.6%. Due to high initial investment and significant production management challenges, the entry barrier for white button mushrooms is relatively high. According to the gross profit margin of Zhongxing Junye's white button mushrooms, it has only fallen below 30% from 2019 to 2022, while remaining above 30% in other years, demonstrating outstanding profitability that is expected to continue. Cordyceps Sinensis: New Forces in Industrialization, Industry Implementation in Progress With climate change and overharvesting, the long-term production trend of wild Cordyceps Sinensis is declining. Artificial cultivation and industrialization to achieve stable supply of Cordyceps Sinensis have become a new path for the industry. Since 2023, Zhongxing Junye and XUERONG have announced the implementation of industrialized cultivation projects for Cordyceps Sinensis. According to Zhongxing Junye's project implementation statement in October 2024, after reaching full production of 6 tons of Cordyceps Sinensis, it is expected to achieve an annual revenue of 262.2 million yuan and a net profit of about 65 million yuan, corresponding to a price of about 40,000 yuan per kilogram and an annual profit margin of 24.8%. Considering the current market price situation, the future actual performance increment may be considerable. Investment Recommendations The industrialization of edible mushrooms has entered a rational return period for capacity. Under long-term losses, leading companies in overcapacity varieties have begun to actively reduce production; stable capacity varieties may still have continued profitability, and we are optimistic about the performance reversal of the main business of edible mushroom companies. In addition, at the initial stage of Cordyceps Sinensis industrialization, the industry dividend is still present, which may open up a second growth curve for edible mushroom companies. It is recommended to pay attention to Zhongxing Junye (002772.SZ) and XUERONG (300511.SZ). Risk Warning Market competition risk, raw material price fluctuation risk, food safety risk, and potential calculation errors, etc