Guolian Minsheng Securities: Pig farming has entered a period of sustained profitability, with a focus on investment opportunities in cyclical industries

According to the report released by Guolian Minsheng Securities, based on data from the Ministry of Agriculture and Rural Affairs, the number of newborn piglets nationwide is expected to continue to increase from the second half of 2024 to June 2025, which may indicate that the supply of live pigs will remain abundant in the second half of 2025. The firm expects pig prices to fluctuate at relatively low levels in phases. The inventory of live pigs and aquatic products is expected to increase in the third quarter, and the recovery in demand is likely to drive the expansion of the pig feed and aquatic feed markets. In addition, the overseas feed market has vast potential, and domestic feed companies are actively seeking growth opportunities abroad, making future development promising. The domestic pet industry may still be in a phase of strong growth momentum, with domestic products replacing imports and continuous product upgrades, focusing on domestic pet food and health companies with significant development potential. The main viewpoints of Guolian Minsheng Securities are as follows: Breeding: Micro profits in the industry in H1 2025, revenue and profit growth for listed pig companies In H1 2025, pig breeding companies (selected 15 listed companies) achieved revenue of 235.068 billion yuan, a year-on-year increase of 16.46%; net profit attributable to shareholders was 16.848 billion yuan, a year-on-year increase of 1315%. Due to the decline in breeding costs, as of July, pig breeding has maintained profitability for 15 consecutive months since May last year, although profit margins have gradually narrowed since the fourth quarter of 2024. In terms of quarters, in Q2 2025, pig companies achieved net profit attributable to shareholders of 8.832 billion yuan, a quarter-on-quarter increase of 10.16% and a year-on-year increase of 21.73%; among them, MUYUAN and Wen's Food Group had net profits of 6.039 billion yuan and 1.473 billion yuan, respectively. Pets: Fluctuations in overseas business, continuous improvement in domestic business In H1 2025, pet food companies (selected Guobao Pet, CHINA PET FOODS, Petpal Tech) achieved total revenue of 6.4 billion yuan, a year-on-year increase of 22%. By company, Guobao Pet's revenue in H1 2025 increased by 33% year-on-year, CHINA PET FOODS' revenue increased by 24% year-on-year, while Petpal Tech's revenue decreased by 14% year-on-year. Overall, pet food companies experienced fluctuations in overseas business due to tariff policies, while domestic self-owned brand businesses performed relatively strongly. In Q2 2025, total revenue for pet food companies was 3.5 billion yuan, a year-on-year increase of 21%. Feed: Industry turning point emerging, performance recovery for feed companies in H1 2025 In H1 2025, feed companies (selected Haida Group, Yuehai Feed, Hefeng Co., Ltd., Bangji Technology) achieved total revenue of 81.3 billion yuan, a year-on-year increase of 15%. By company, Bangji Technology's revenue in H1 2025 increased by 167% year-on-year. Haida Group, Yuehai Feed, and Hefeng Co., Ltd. maintained relatively steady growth in revenue. In Q2 2025, total revenue for feed companies was 46 billion yuan, a year-on-year increase of 18%. The net profit attributable to shareholders of major feed companies improved in H1 2025, with a total net profit of 2.94 billion yuan, a year-on-year increase of 42%. Risk Warning: Risks of animal epidemics, risks of livestock and poultry prices remaining low for a long time, risks of raw material price fluctuations, and exchange rate fluctuation risks