Huachuang Securities: In August, the growth of vaccines for diarrhea, brucellosis, and feline trivalent was strong, and the raw materials for veterinary drugs are entering a peak season with price increases

According to the Zhitong Finance APP, Huachuang Securities released a research report stating that from the cumulative batch issuance data from January to August, most vaccine varieties have seen significant year-on-year growth. Among them, domestically produced rabies vaccines and feline trivalent vaccines increased by +16.8% and +78.9% respectively. In terms of varieties, in the first eight months of this year, the fast-growing products in pig vaccines are still the economic product circovirus vaccine, as well as the compulsory immunization varieties pseudorabies vaccine and classical swine fever vaccine. This is speculated to be driven by the continued prosperity of farming, an increase in pig inventory, and contributions from new products such as the circovirus bivalent vaccine.

Since late August, the prices of veterinary raw materials have rebounded from the bottom, and as of the end of September, the VPI index has rebounded approximately 2.1% from the bottom. In terms of reasons, according to the China Veterinary Drug Feed Trading Center, the tightening of the supply side and the locking of large downstream orders have driven the prices of products such as tylosin raw materials to continue to rise, thereby driving up the prices of related categories such as tiamulin; products like florfenicol have rebounded from the bottom, benefiting from the increased demand during the "golden September and silver October," but the core driving force comes from changes on the supply side, with florfenicol mainly benefiting from an improved supply environment due to reduced market competition.

The main viewpoints of Huachuang Securities are as follows:

Vaccine Batch Issuance: Most varieties have seen year-on-year growth in the first eight months, with circovirus, diarrhea, brucellosis, and feline trivalent vaccines continuing to perform outstandingly.

From the cumulative batch issuance data from January to August, most vaccine varieties have seen significant year-on-year growth. Among pig vaccines, the foot-and-mouth disease vaccine, circovirus vaccine, pseudorabies vaccine, classical swine fever vaccine, gastroenteritis bivalent vaccine, porcine parvovirus vaccine, and porcine Japanese encephalitis vaccine increased by +11.0%, +38.1%, +34.0%, +26.7%, +50.3%, +3.2%, and +24.6% respectively, with only the porcine reproductive and respiratory syndrome vaccine showing a year-on-year decrease of -2.9%. Among poultry vaccines, the avian influenza trivalent vaccine, Marek's vaccine, Newcastle disease vaccine, and duck infectious serositis vaccine increased by +8.1%, +4.6%, +12.5%, and +21.0% respectively. In terms of ruminant vaccines, the brucellosis vaccine increased by +58.8%, while the small ruminant plague vaccine decreased by -36.1%. Among pet vaccines, domestically produced rabies vaccines and feline trivalent vaccines increased by +16.8% and +78.9% respectively.

Analysis of Subcategories: Continued farming prosperity, inventory growth, diseases, and new products contribute to growth.

In terms of varieties, in the first eight months of this year, the fast-growing products in pig vaccines are still the economic product circovirus vaccine, as well as the compulsory immunization varieties pseudorabies vaccine and classical swine fever vaccine. This is speculated to be driven by the continued prosperity of farming, an increase in pig inventory, and contributions from new products such as the circovirus bivalent vaccine. The growth rate of the compulsory immunization foot-and-mouth disease vaccine remains relatively stable, while among products specifically for sows or primarily used by sows, the fastest-growing is still the gastroenteritis bivalent vaccine, followed by the porcine Japanese encephalitis vaccine, which also achieved good growth. The increase in piglet diarrhea issues may be a key factor for the rapid growth of the gastroenteritis bivalent vaccine.

Among poultry vaccines, the fast-growing product is the duck infectious serositis vaccine. Since last year, the issues related to duck sourcing from chickens have drawn attention from the farming sector, which may be the main factor driving the high growth of this vaccine product. Additionally, the avian influenza trivalent vaccine, Marek's vaccine, and Newcastle disease vaccine continue to grow steadily. In terms of ruminant vaccines, with the continuous launch of new products, the brucellosis vaccine continues to maintain a high growth rate, while the small ruminant plague vaccine has seen a certain decline due to the high base from the same period last year In terms of pet vaccines, since the launch of the domestic cat trivalent vaccine at the beginning of last year, the batch issuance volume has shown an accelerating trend since Q4 2024, maintaining a high growth rate in the first eight months of this year with continuous market promotion and consumer education.

Veterinary Raw Materials: The VPI index turned positive month-on-month in September after three consecutive months of decline

As of the end of September, according to the China Veterinary Drug Feed Trading Center, the Veterinary Raw Materials Price Index (VPI) was 69.22, down 0.8% compared to the end of August, up 8.7% year-on-year, and up 13.4% from last year's low. The average VPI index in September was 68.70, an increase of 1.1% compared to August, marking the first month-on-month increase after three consecutive months of decline.

By variety, prices for the vast majority of species improved in September. Since the peak of the current round of price increases for veterinary raw materials at the end of May this year, the VPI index has declined for nearly three months, with an adjustment of -2.1%. Since late August, prices for veterinary raw materials have rebounded from the bottom, and by the end of September, the VPI index had rebounded about 2.1% from the bottom. Among them, Tylosin and Florfenicol led the increase, both with a bottom increase of 3.7%, followed closely by Tiamulin with a bottom increase of 3.4%, and the bottom rebounds for Tilmicosin, Tylvalosin, and Amoxicillin were approximately 1.4%, 2.0%, and 1.9%, respectively.

From the reasons, according to the China Veterinary Drug Feed Trading Center, the tightening of the supply side and the locking of large downstream orders have driven the continuous rise in prices of products such as Tylosin raw materials, which in turn has driven up the prices of related varieties such as Tilmicosin; products like Florfenicol have rebounded from the bottom, benefiting from the increased demand during the "Golden September and Silver October," but the core driving force comes from changes on the supply side, with Florfenicol mainly benefiting from an improved supply environment due to reduced market competition. Overall, the price increase of veterinary raw materials since late August has been driven by a combination of factors including costs, corporate strategies, and market demand, showing a general upward trend across varieties. It is expected that the short-term positive situation in the industry is likely to continue, and the market may maintain a fluctuating upward trend.

Investment Recommendations: The industry is gradually emerging from the trough, focusing on undervalued targets with both elasticity and certainty

Although the spread of industry competition has had a significant impact on animal health companies since Q2 last year, from the supply perspective, the continuously intensifying competition has objectively led to a number of companies being cleared out. Since 2025, the prices of veterinary raw materials have stabilized and rebounded, with macrolide products even experiencing significant price and profit recovery. There has also been a significant year-on-year improvement in the batch issuance of most vaccine varieties. During this process, corporate performance has shown significant differentiation, but well-performing companies share a common trait: innovation, whether in product innovation, marketing innovation, or capital operation innovation, which is ultimately reflected in the profit statement and deserves continuous attention.

In terms of targets, it is recommended to focus on RINGPU (300119.SZ), Kexin Biotechnology (688526.SH), Huisheng Biotechnology (300871.SZ), JINYU (600201.SH), Zhongmu Co., Ltd. (600195.SH), PULIKE (603566.SH), Guobang Pharmaceutical (605507.SH), and Lukan Pharmaceutical (600789.SH), among others Risk Warning

Downstream demand recovery is less than expected, intensified industry competition, product quality issues, slower-than-expected progress in new product development, adjustments in industry regulatory policies, etc