Core Viewpoint - The agricultural industry in China is at a pivotal point, necessitating a reevaluation of strategies to address various challenges, including resource conservation, food security, and the welfare of farmers [1][3]. Industry Level Summary - The pig farming industry is characterized by inefficiency and significant variance, with many companies struggling to maintain profitability. Future opportunities may favor technology-driven enterprises that can adapt to a capital-constrained environment [2][4]. - The agricultural sector has a vast market potential, yet only specific segments like pig farming and aquaculture have seen substantial growth in market capitalization and revenue, driven by technological advancements [2][4]. - The transition to a "platform + ecosystem" model is essential for the industry to escape homogeneous competition and foster innovation [2][4]. Company Level Summary - The company is transitioning from a traditional agricultural production model to a modern service-oriented platform, aiming to create a "value symbiosis" ecosystem [3][5]. - The strategic shift is driven by a deep understanding of the agricultural landscape and aims to address issues such as overcapacity, environmental concerns, and the economic challenges faced by farmers [6][7]. - The company has invested significantly in developing a scientific farming system and high-end breeding techniques, focusing on creating value for farmers and enhancing production efficiency [6][7]. - The company's "platform + ecosystem" strategy emphasizes collaboration across the supply chain, aiming for sustainable profit generation and improved operational efficiency [5][6]. - The company is expected to lead the industry in profitability and growth, with projections indicating significant increases in the number of serviced farms and overall profitability in the coming years [7].

Investment Rating - The report assigns a "Buy" rating for the company, Dekang Agriculture [1][14][16] Core Insights - The report emphasizes that the agricultural industry is at a pivotal moment, necessitating a reevaluation of strategies to address emerging challenges and opportunities [4][5] - Dekang is transitioning from a traditional agricultural production company to a modern service-oriented platform, focusing on a "platform + ecosystem" strategy to enhance efficiency and sustainability [10][11][12] - The company aims to create a value-sharing ecosystem that benefits all stakeholders, including farmers and enterprises, by leveraging technology and innovation [11][12][18] Summary by Relevant Sections Industry Overview - The pig farming industry in China is characterized by inefficiency and significant variance in operational performance among companies, with a need for modernization and technological advancement [6][29] - The report highlights a shift in national agricultural policy towards ensuring farmers' rights and fostering enterprise innovation, indicating a supportive environment for companies like Dekang [5][27][28] Company Strategy - Dekang's "platform + ecosystem" strategy is designed to facilitate collaboration across the supply chain, enhancing overall efficiency and profitability [11][12] - The company has invested significantly in technology and innovation, aiming to improve breeding efficiency and product quality, which aligns with national agricultural goals [12][13][18] Financial Projections - The report forecasts that Dekang will serve 3,900 to 5,000 modern farms by 2027, with significant revenue growth projected from service fees [14][16] - Expected net profits before fair value adjustments for biological assets are projected to reach 36 billion, 54 billion, and 76 billion RMB from 2025 to 2027, respectively [14][16] Competitive Position - Dekang is positioned to outperform competitors in terms of profitability, with a projected return on equity (ROE) of 48% in 2024, significantly higher than peers [13][14] - The company’s operational efficiency is underscored by its low fixed asset investment per head, which is expected to enhance its competitive edge in the industry [12][36]

Core Viewpoint - Dekang Agriculture and Animal Husbandry, as a rising star in the industry, has demonstrated strong learning and innovation capabilities, creating a unique integrated breeding model for family farms that has achieved leading breeding results [1] Group 1: Company Growth and Strategy - The number of family farms empowered by the company increased from 2,011 at the end of 2020 to 2,608 by May 2023, with the number of pigs served rising from 1.22 million in 2020 to 4.21 million in 2022 [2] - The company plans to increase the number of empowered family farms to 3,275, 4,500, and 6,200 by 2025, 2026, and 2027 respectively, with expected pig numbers reaching 9.65 million, 13.50 million, and 18.50 million during the same period [2] - The company's breeding costs are industry-leading, with a projected total cost of 12.27 yuan per kilogram by April 2025, indicating a profit of 348 yuan per head [2] Group 2: Industry Context and Competitive Advantage - The family farm model is highly viable under the rural revitalization strategy, with the "company + family farm" model providing significant policy advantages and reducing environmental and disease risks compared to large-scale self-breeding [3] - The concentration of the pig farming industry has increased significantly post-African swine fever, with the top 26 pig companies' market share rising from 7% in 2017 to an expected 33% in 2024 [3] - The company’s cost control is attributed to its advanced breeding system, strong corporate culture, and innovative production model, which collectively enhance its competitive edge [3] Group 3: Financial Projections - The company is expected to achieve total revenues of 28.22 billion, 33.75 billion, and 46.32 billion yuan, with net profits of 3.70 billion, 3.67 billion, and 6.97 billion yuan from 2025 to 2027 [4] - The projected earnings per share (EPS) for the same period are 9.52, 9.43, and 17.92 yuan, with a target price of 120 Hong Kong dollars based on comparable company valuations [4]

Investment Rating - The report assigns a "Buy" rating to the company with a target price of HKD 120, compared to the latest closing price of HKD 78 [4]. Core Viewpoints - The company, Dekang Agriculture and Animal Husbandry, is recognized as a rising star in the industry, demonstrating strong learning and innovation capabilities. It has creatively developed a family farm model for pig breeding and fattening, achieving leading breeding results [1][2]. - The company’s service-enabled family farms have increased from 2,011 households at the end of 2020 to 2,608 households by May 2023, with the number expected to grow significantly in the coming years [2]. - The report highlights the company's cost advantages, with a projected total cost of approximately HKD 12.27 per kilogram by April 2025, leading to a per-head profit of HKD 348, positioning it as a leader in the industry [2][4]. Summary by Sections 1. Family Farm Model - The family farm model is seen as highly viable under the national rural revitalization strategy, providing significant policy advantages and reducing environmental and disease risks compared to large-scale self-breeding operations [3][16]. - The model allows for smaller-scale operations, which are less prone to environmental and disease challenges, thus enhancing overall industry efficiency and supporting rural revitalization [3][22]. 2. Cost Leadership - The company has achieved a leading position in cost control due to its advanced breeding systems, excellent management, and light-asset model, with total costs decreasing consistently over the years [4][35]. - The breeding system has been developed through significant investment and has resulted in the company’s breeding performance ranking first in the nation for certain pig breeds [7][42]. 3. Growth Potential - The report anticipates that the number of family farms served by the company will continue to rise, with projections of 3,275, 4,500, and 6,200 households from 2025 to 2027, respectively [2][8]. - The company is expected to benefit from the ongoing transformation in the domestic pig farming industry, positioning itself as a potential growth leader [2][8]. 4. Financial Forecast - The projected total revenue for the company is expected to reach HKD 28.22 billion, HKD 33.75 billion, and HKD 46.32 billion from 2025 to 2027, with net profits of HKD 3.70 billion, HKD 3.67 billion, and HKD 6.97 billion, respectively [11][8]. - The report indicates that the company’s earnings per share (EPS) will be HKD 9.52, HKD 9.43, and HKD 17.92 for the same period, reflecting strong financial performance [11][8].

Core Viewpoint - The significant rise in the stock price of Dekang Agriculture has brought the pig farming industry back into public focus, with a year-to-date increase of over 260% [1][2]. Group 1: Stock Performance - Dekang Agriculture's stock price surged from HKD 26 to a peak of HKD 96, marking a historical high and a year-to-date increase of 269% from its low [1][3]. - As of June 16, the stock closed at HKD 88.4, reflecting a cumulative increase of 224% for the year [1][2]. - The company reported a projected revenue of approximately RMB 22.463 billion for 2024, a year-on-year growth of 39%, and a net profit of about RMB 4.102 billion, reversing a loss of RMB 1.775 billion in 2023 [3]. Group 2: Industry Context - The pig farming industry has maintained profitability for 13 consecutive months, primarily due to a significant reduction in production costs for leading enterprises [2]. - Despite overall profitability, pig prices have been declining this year, leading to shrinking margins for farmers [2][5]. - The industry is characterized by a "strong supply and weak demand" dynamic, making cost reduction a key competitive factor [2][8]. Group 3: Competitive Position - Dekang Agriculture has established itself as a leading player in the pig farming sector, ranking first in the compound annual growth rate of large-scale pig farming enterprises in China and sixth in national pig sales [3]. - The company has implemented an innovative "company + sow breeding and fattening farm" model, which enhances asset efficiency and stability in farmer cooperation [4]. - Analysts predict that Dekang Agriculture's net profit per pig will be significantly higher than the industry average, with estimates of RMB 350-370 per pig compared to RMB 161 for scattered farming and RMB 302 for large-scale farming [4]. Group 4: Market Trends - The stock performance of Dekang Agriculture contrasts sharply with other listed pig farming companies, many of which have seen declines in stock prices this year [5]. - The average pig price has been fluctuating around RMB 14 per kilogram, with significant year-on-year declines observed [5][6]. - Analysts suggest that the current market conditions may lead to a stable development phase for the pig farming industry, with potential for price recovery in the second half of the year if supply capacity is managed effectively [7][8].

Summary of the Conference Call for Dekang Agriculture Industry Overview - The current period is considered a favorable time to invest in the pig farming sector as the downward price cycle has been resolved, with policy guidance and restored market confidence expected to drive stock prices higher [2][5] - The pig farming industry has completed initial scaling, with future competition focusing on leading enterprises, emphasizing management, breeding costs, and cash flow value creation capabilities [2][6] Company Profile: Dekang Agriculture - Dekang Agriculture is the sixth largest pig farming company and the third largest yellow chicken farming company in China, with a compound annual growth rate (CAGR) of approximately 35% in pig output over the past three years, and an expected CAGR of nearly 25% over the next three years [2][7] - The company is projected to reach a pig output of approximately 11 million heads by 2025 and 15 million heads by 2026 [7] Business Model Innovation - Dekang has innovated a light asset model by outsourcing breeding to partner farmers, avoiding capital expenditures on sow farms while leveraging the same funds for greater operational leverage [2][10] - This model has resulted in a higher long-term return on assets, with an average return on equity (ROE) of nearly 12% from 2018 to 2024, compared to the industry leader at 19% [10][12] Financial Performance - In 2024, Dekang's net profit per pig was approximately 360 yuan, significantly above the industry average, with overall costs continuing to decline in 2025 [3][12] - The company’s sales net profit margin averaged around 10% from 2018 to 2024, with asset turnover rates being higher due to lower capital investment in sow farms [12] - The expected net profit before fair value adjustments for biological assets in 2025 is close to 3.5 billion yuan, reflecting a year-on-year growth of approximately 16% [14] Market Position and Valuation - Dekang's stock has shown significant growth in the Hong Kong agricultural sector, with a price-to-earnings (P/E) ratio of about 8 times for 2025, still below the industry average of 15 times [15][18] - The company is viewed as a cyclical growth stock with substantial valuation recovery potential, driven by rapid output growth and favorable pricing dynamics [16][18] Future Outlook - Dekang is expected to maintain rapid growth based on its innovative light asset farming model, supported by a favorable talent environment and strategic foresight [13] - The company’s poultry farming business is projected to maintain an output of around 90 million birds in 2025, with a conservative sales price expectation of 14.3 yuan per kilogram [13] Key Recommendations - Dekang Agriculture is recommended as a focus for investment due to its robust growth in poultry farming, reasonable sales price expectations, and significant growth in net profit before fair value adjustments [17][18] - The overall market confidence in the pig farming sector has improved, suggesting a potential catalyst for further growth in the coming months [16]

Core Viewpoint - Dekang Agriculture (德康农牧) has seen a significant increase in its stock price, reaching a historical high of 96 HKD per share, with a year-to-date increase of approximately 257% since its low in January 2023 [1][3][2]. Group 1: Stock Performance - On June 11, 2023, Dekang Agriculture's stock price peaked at 96 HKD per share, closing at 91.75 HKD, marking a 15.34% increase for the day [1][3]. - The stock has risen from a low of 25.68 HKD per share in early January 2023, indicating a substantial year-to-date increase of about 257% [2][3]. Group 2: Business Performance - In the first five months of 2023, Dekang Agriculture sold 4.2971 million pigs, generating a revenue of 8.457 billion CNY, and sold 35.8271 million yellow feathered chickens, with a revenue of 1.099 billion CNY [2][4]. - The company reported a sales volume of 869,000 pigs in May 2023, with a revenue of 1.7 billion CNY, and a sales volume of 7.4628 million yellow feathered chickens, generating 224 million CNY in revenue [4][6]. - The average selling price for commodity pigs in May 2023 was 14.64 CNY per kilogram, which is a decrease of 1.15% from April 2023 [4]. Group 3: Cost Structure and Competitive Advantage - Dekang Agriculture has a leading position in terms of breeding costs, with the total cost of pig farming reportedly below 13 CNY per kilogram [4][5]. - The company operates two national-level pig breeding farms, with a core breeding stock of approximately 14,941 heads, including both breeding sows and boars [5]. - Analysts expect that the company will continue to benefit from its low-cost advantage and improve profitability as the industry stabilizes [8].

Core Viewpoint - The livestock industry, particularly pig farming, is experiencing a positive outlook, supported by stable fundamentals and favorable regulatory signals aimed at reducing speculation and stabilizing prices [1][4]. Company Summary - Dekang Agriculture (德康农牧) has shown significant growth, with projected revenue for 2024 increasing by 39% to 22.5 billion RMB, and net profit turning positive at over 4.2 billion RMB [2][3]. - The company’s pig output is expected to rise by 24% in 2024, reaching 8.78 million pigs, with an average selling price of approximately 16.7 RMB per kilogram, leading to a per-head profit of around 360-370 RMB, positioning it among the industry leaders [2][3]. - Dekang's breeding advantages, particularly the E-series boars, have contributed to reduced costs, with total costs estimated at around 12.5 RMB per kilogram, and further optimization is anticipated as the company expands into new markets [3][4]. Industry Perspective - The pig farming sector has benefited from previous capacity reductions, leading to favorable pricing conditions that support profitability [2]. - Recent regulatory signals are expected to favor companies like Dekang that adopt a service-oriented model, enhancing farmer incomes while maintaining efficiency and fairness in the industry [4]. - The overall capital expenditure in the industry is stabilizing, and the shift towards healthy competition is likely to benefit cost-efficient companies like Dekang in the long term [4].

Investment Rating - The report assigns an "Outperform" rating to the company for the first time, with a reasonable valuation range of HKD 96.40 - 99.90, indicating a potential upside of 30%-35% from the current price of HKD 73.45 [4][6]. Core Insights - The company is a leading player in the livestock industry in Southwest China, focusing on pig and yellow chicken farming, with a complete industry chain from feed production to breeding, farming, and sales [2][13]. - In 2024, the company is expected to achieve a pig output of 8.78 million heads, a 24% year-on-year increase, ranking sixth nationally, while yellow chicken output is projected at 88.12 million heads, a slight decrease of 0.7%, ranking third nationally [2][13]. - The company is expanding its slaughtering and food processing projects, aiming for an annual slaughter volume of over 3 million pigs, which is expected to create new growth opportunities [2][13]. Company Overview - The company has established a unique "company + family farm" breeding model, allowing farmers to raise breeding pigs directly, which leads to a lighter asset structure and more stable cooperation with farmers [3][26]. - The management team has a strong strategic vision, focusing on the core breeding segment, and has built a breeding group of nearly 15,000 heads by the end of 2024, capable of supporting the production of over 1.17 million breeding sows [3][27]. Industry Analysis - The report is optimistic about the continuation of favorable conditions in the livestock industry, emphasizing the importance of low-cost enterprises gaining market share [2][57]. - The pig industry is expected to maintain price stability due to insufficient expansion willingness, while the yellow chicken sector is anticipated to benefit from a recovery in domestic consumption [2][78]. Financial Forecasts - The company is projected to achieve a revenue of HKD 22.463 billion in 2024, a 39% increase year-on-year, with a net profit of HKD 3.297 billion, marking a significant turnaround from a loss in 2023 [5][30]. - The earnings per share (EPS) for 2025 is estimated at HKD 8.87, with a price-to-earnings (PE) ratio of approximately 7.6x, significantly lower than the industry average of 15.4x, indicating potential for valuation recovery [4][5].

Group 1 - The Hang Seng Index rose by 0.33%, gaining 79 points to reach 24,261 points, while the Hang Seng Tech Index fell by 0.33% [1] - Insurance funds continue to increase holdings in Chinese bank stocks, with institutions indicating significant valuation recovery potential for Hong Kong bank stocks [1] - Bank of Communications (01988) rose by 3.47%, China Everbright Bank (06818) increased by 1.86%, and Industrial and Commercial Bank of China (01398) gained 1.68% [1] - Three-Synch Pharmaceutical (01530) surged over 11% to a new high after reaching a significant licensing agreement with Pfizer, with strong ASCO data performance [1] - Innovent Biologics (01801) rose over 3.42%, with a year-to-date increase of over 120%, as Morgan Stanley anticipates further clinical catalysts to boost stock performance [1] - InnoCare Pharma-B (09606) increased by 13%, recently disclosing clinical data for DB-1310, attracting attention from international pharmaceutical giants [1] - China Rare Earth (00769) surged over 17%, following a 60% increase in trading volume, with positive signals for rare earth exports [1] - Pop Mart International (09992) rose by 2.47%, continuing to set historical highs, with its Labubu brand gaining global popularity [1] - Airline stocks continued their recent upward trend, benefiting from falling oil prices and the appreciation of the Renminbi, with institutions optimistic about airline profitability [1] - Air China (00753) rose by 4.5%, China Eastern Airlines (00670) increased by 4.42%, China Southern Airlines (01055) gained 4.18%, and BOC Aviation (02588) rose by 3.42% [1] Group 2 - Zhi Zi Cheng Technology (09911) rose over 7%, approaching historical highs, as the company plans to establish its global headquarters in Hong Kong, with institutions optimistic about future profit margin improvement [2] - Dekang Agriculture and Animal Husbandry (02419) increased by 4.97% to a new high, with the company reporting sales of 869,400 pigs in May, drawing market attention to industry capacity regulation progress [2] - Shide Global (00487) surged nearly 140%, as Australia’s Crown Resorts expressed interest in acquiring the property where the Sixteen Piers Casino is located [2]