CITIC Securities: The high prosperity of yellow chickens continues, while white feather chickens turned to losses in September

According to the Zhitong Finance APP, China Merchants Securities released a research report stating that the supply of white feather chicks in September was tight, while the willingness of the breeding sector to replenish the first three batches of chickens before the New Year was strong, collectively driving up chick prices; however, due to cost control demands in the breeding sector, support for chick prices is limited. Additionally, as the cost of chicks rises but the price of broilers remains sluggish, the breeding sector is gradually incurring losses. In terms of yellow feather chickens, with the demand side gradually improving and the dual festivals of National Day and Mid-Autumn Festival driving demand, the price of yellow chickens continued to recover in September, significantly improving profitability in the breeding sector. The leading enterprises' costs for yellow feather broilers have fallen to a low level, and the improvement in consumption in the fourth quarter supports the continuation of chicken price prosperity, awaiting the release of profitability in the breeding sector. The main points of China Merchants Securities are as follows: White Feather Chickens: Rising chick costs and sluggish chicken prices drag down profitability In September, the average price of chicks in major production areas was 3.27 yuan/chick, down 8.3% year-on-year and down 0.7% month-on-month; the average price of broilers was 6.99 yuan/kg, down 3.2% year-on-year and down 2.4% month-on-month; the average price of chicken products was 8,663 yuan/ton, down 6.4% year-on-year and down 0.8% month-on-month; the average loss per chick in the broiler breeding sector was 1 yuan. The supply of chicks was tight in September, and the strong willingness of the breeding sector to replenish the first three batches of chickens in early September collectively drove up chick prices; however, due to cost control demands in the breeding sector, support for chick prices is limited. As the cost of chicks rises but the price of broilers remains sluggish, the breeding sector is gradually incurring losses. Since the beginning of the year, the volume of overseas breeding imports has significantly decreased year-on-year, and it is expected that the supply of parent stock broiler chicks in China will be tight in the second half of 2025, which will also affect the supply of commercial broiler chicks in 2026. The outlook for the breeding sector is optimistic. Yellow Feather Chickens: Both volume and price rose in September, with significant recovery in prosperity In September, the average price of fast-growing chickens was 5.41 yuan/jin, up 2.5% year-on-year and up 6% month-on-month; the average price of Xueshan grass chickens was 8.95 yuan/jin, up 5.1% year-on-year and up 3% month-on-month. Since the beginning of the year, the top two enterprises have continuously increased their output, but the demand side, especially the catering channel, lacked strong support, putting downward pressure on yellow feather chicken prices. By mid-year, most breeding entities in the industry had reported losses, and it is expected that backward production capacity may accelerate clearance. As the demand side gradually improves, coupled with the dual festivals of National Day and Mid-Autumn Festival driving demand, the price of yellow chickens continued to recover in September, significantly improving profitability in the breeding sector. The leading enterprises' costs for yellow feather broilers have fallen to a low level, with WENS' yellow feather chicken output cost dropping to around 5.6 yuan/jin by mid-year, and LIHUA's yellow feather chicken output cost possibly falling below 5.5 yuan/jin; the improvement in consumption in the fourth quarter supports the continuation of chicken price prosperity, awaiting the release of profitability in the breeding sector. Optimistic about the prosperity of white chicken breeding, seasonal recovery of yellow chicken prices is expected White Feather Chickens: Although imports of grandparent stock chickens are expected to increase year-on-year in 2024, they have not returned to the normal import levels before the interruption of imports; it is expected that the demand for high-quality parent stock chicks will be good in 2025; coupled with the significant decrease in overseas imports, the supply of parent stock chicks will be tighter in the second half of 2025, which will also affect the supply of commercial chicks in 2026. The outlook for the breeding sector is optimistic, with a strong recommendation for the integrated leading enterprise Sunner (002299.SZ) that has improved costs. Yellow Feather Chickens: Currently, the inventory of parent stock chickens has fallen to historically low levels, and as the industry has been experiencing losses for some time, the contraction in supply lays the foundation for future price increases. Currently, the breeding costs for yellow chickens have fallen to low levels, and after the price recovery, there is expected to be significant profit elasticity released In the long term, as consumer habits change, sales ban policies are implemented, and economic recovery boosts consumption, the market for chilled yellow-feathered chickens may still have significant development potential. We strongly recommend LIHUA (300761.SZ) and Decong Agriculture and Animal Husbandry (02419). Risk Warning Chicken price fluctuations exceed expectations; the sales and cost performance of listed companies fall short of expectations; sudden large-scale uncontrollable epidemics; fluctuations in feed raw material prices exceed expectations; major food safety incidents