Summary of Muyuan Foods (002714.SZ) Conference Call Company Overview - **Company**: Muyuan Foods (002714.SZ) - **Market Cap**: Rmb259.0 billion / $37.2 billion - **Enterprise Value**: Rmb313.3 billion / $44.9 billion - **Current Price**: Rmb47.33 - **Target Price**: Rmb67.00 - **Upside Potential**: 41.6% [1][4] Key Financial Insights - **Earnings Forecast**: Recurring net profit estimates revised down by 52% for 2025E, 21% for 2026E, and 14% for 2027E due to lower domestic hog pricing [1] - **Revenue Projections**: Expected revenue growth from Rmb137.9 billion in 2024 to Rmb154.8 billion in 2027 [8] - **EBITDA**: Projected to decline from Rmb37.2 billion in 2024 to Rmb31.5 billion in 2025E, then recover to Rmb55.9 billion by 2027E [8] - **EPS**: Expected to decrease from Rmb3.27 in 2024 to Rmb2.87 in 2025E, then rise to Rmb7.80 by 2027E [8] - **Free Cash Flow**: Positive free cash flow of Rmb24.3 billion in 2024, with expectations for further improvement [4][25] Industry Dynamics - **Hog Market Outlook**: Anticipated positive supply/demand fundamentals in the domestic hog market for 2026-27E, with hog prices expected to rise to Rmb14.8-15.3/kg from Rmb13.8/kg in 2025E [2][34] - **Supply Control Measures**: Ongoing reduction of the sow herd expected to lead to a sustained supply deficit of 2% in 2026-27E [35] - **Market Share Growth**: Muyuan's hog output projected to reach 93.4 million heads by 2027E, capturing 13.7% of the domestic market [26] Competitive Advantages - **Cost Leadership**: Muyuan's total unit cost expected to decrease to Rmb12.3/kg in 2025E, significantly lower than peers [3] - **Breeding System**: Unique two-breed rotative breeding system and integrated slaughtering business to enhance breeding optimization and profit margins [3][25] - **Operational Efficiency**: Shift in strategic focus towards operational efficiency and quality improvement, reducing CAPEX intensity [25] Strategic Initiatives - **Global Expansion Plans**: Muyuan aims to expand internationally, targeting markets with high pork consumption such as Vietnam, the Philippines, and Thailand [29] - **Partnerships**: Strategic partnership with BAF Vietnam Agriculture to enhance hog farming efficiency and environmental sustainability [33] Risks and Considerations - **Market Volatility**: Potential risks associated with hog price volatility and the impact on profitability [4] - **Regulatory Environment**: Changes in government policies and regulations affecting the hog industry could impact operations [36] Conclusion - **Investment Recommendation**: Maintain Buy rating on Muyuan Foods with a revised target price of Rmb67.00, reflecting strong potential for free cash flow generation and market share growth in the hog industry [4][25]

Market Overview - The Hang Seng Index faces short-term resistance at 27,188 points, with expectations of two interest rate cuts in 2026 following the Federal Reserve's December rate cut of 0.25 basis points [1] - The market anticipates policy initiatives in the first quarter of 2026 to boost domestic demand and achieve technological self-reliance, potentially leading to further monetary easing [1] - Recent adjustments in financing margin ratios by the Shanghai and Shenzhen stock exchanges may lead to short-term market corrections, impacting the inflow of foreign capital into Hong Kong stocks [1] Sector Focus - The report highlights a positive outlook for the biopharmaceutical sector, noting that the value of new drug licensing transactions in mainland China reached a record high last year, indicating sustained demand [5] - Defensive sectors are expected to attract capital as market risk appetite decreases, suggesting a shift towards high-yield stocks [5] Economic Indicators - The U.S. Federal Reserve's recent decision to cut rates aligns with market expectations, with GDP growth forecasted to rise by 0.5 percentage points to 2.3% for 2026 [2] - The report notes a significant increase in cross-border transactions using the euro, with payments rising by 22.8% last year, marking the highest growth in 15 years [7] - China's total electricity consumption surpassed 10 trillion kilowatt-hours for the first time, reflecting a 5% year-on-year growth, which is more than double the annual consumption of the U.S. [7] Corporate News - Xiaomi and OPPO have reportedly lowered their annual shipment forecasts by over 20% due to rising upstream storage costs, with Vivo also adjusting its expectations [8] - TCL Electronics anticipates a profit increase of up to 60% for the previous year, while KANAT Optical expects a profit growth of no less than 30% [2] - Yongbai Technology is under investigation by the China Securities Regulatory Commission for its dealings with CATL, involving orders exceeding 100 billion yuan [2] Regulatory Developments - The China Securities Regulatory Commission emphasizes the need for stable market conditions and timely counter-cyclical adjustments to prevent significant market fluctuations [7] - New regulations are being implemented to phase out Chinese suppliers from critical infrastructure, reflecting a shift in the EU's technology policy [6]

Group 1: Company Developments - Former CEO of Weilong, Sun Yinoong, has joined Dayao as CEO, bringing extensive experience from Coca-Cola and Xiamen Yili Food Group [1] - Qian Dama International Holdings has officially launched its IPO process in Hong Kong, aiming to raise funds for expanding its store network and enhancing supply chain capabilities [2] - Muyuan Foods has projected a net profit of 14.7 billion to 15.7 billion yuan for 2025, reflecting a decline of 12.20% to 17.79% compared to the previous year due to fluctuations in the pig market [2][3] - Jinlongyu announced the transfer of its 50% stake in a joint venture with Mars China for a total of $60 million, which is expected to impact its 2026 earnings significantly [4] - New Hope plans to raise approximately 3.338 billion yuan through a private placement to enhance digital transformation and repay debts [4] Group 2: Industry Trends - Yonghui Supermarket has forecasted a net loss for 2025, indicating challenges in its operational performance [5] - Ito En is advancing local tea procurement in China to mitigate rising costs and meet the growing global demand for matcha [5] - Yunnan coffee has expanded its market reach to 34 countries, with significant growth in planting area and production, leading to a 358% increase in exports in 2024 [8] - The World Health Organization has called for increased taxation on sugary and alcoholic beverages to address public health issues related to obesity and related diseases [10]

Core Viewpoint - Muyuan Foods has successfully passed the main board listing hearing at the Hong Kong Stock Exchange, with Morgan Stanley, CITIC Securities, and Goldman Sachs serving as joint sponsors [1] Company Overview - Since 2021, Muyuan Foods has maintained its position as the world's largest pig farming company based on production capacity and output, according to Frost & Sullivan [1] - The company employs a vertically integrated business model that encompasses the entire industry chain, including pig breeding, farming, feed production, and meat processing [1] Market Position - Muyuan Foods' global market share in pig output has increased from 2.6% in 2021 to 5.6% in 2024, surpassing the combined market share of the second to fourth largest competitors [1] - In 2024, the company ranks fifth globally and first in China in terms of pig slaughtering volume, having entered the meat processing business in 2019 [1] Industry Insights - Global pork consumption has shown stability, rising from 95.2 million tons in 2020 to 115.3 million tons in 2024, with a compound annual growth rate of 4.9% [1] - As the world's largest pork consumer, China's per capita major meat consumption is projected to be 69.4 kg per person in 2024, indicating significant growth opportunities compared to the United States' 102.0 kg per person [1] - The proportion of chilled pork in total pork consumption in China remains lower than that in developed countries, suggesting substantial market potential [1]

Group 1 - The pace of Henan enterprises planning to list in Hong Kong has significantly accelerated, with three companies advancing their listing processes within a week, marking an unusual frequency in the history of Henan's capital market [1] - Muyuan Foods has successfully passed the Hong Kong Stock Exchange listing hearing, positioning itself as the world's largest pig farming enterprise, while Hanwei Technology and Jinxing Beer have also announced their plans to list in Hong Kong [1] - Other Henan enterprises, such as Real Bio, Banu Hotpot, and United Information Technology, are also actively preparing for their Hong Kong listings, contributing to a growing trend of Henan companies seeking to enter the capital market [1] Group 2 - The recent surge in Hong Kong listings is driven by a resonance of policies, market conditions, and corporate needs, with the Henan government introducing a high-quality development action plan for the private economy and establishing a "green channel" for companies seeking to list [2] - Listing in Hong Kong not only injects capital into enterprises but also encourages them to enhance governance structures and management standards according to international norms, creating a dual empowerment effect in capital markets [2] - The concentration of Henan enterprises planning to list reflects the province's deeper integration into domestic and international dual circulation, showcasing a transformation of key variables into significant increments for high-quality development [2]

Core Viewpoint - The company, Muyuan Foods, is expected to face a significant decline in profits for 2025 due to the cyclical downturn in the pig industry, with projected net profits decreasing by 12.20% to 17.79% compared to the previous year [6][7]. Financial Performance - Muyuan Foods forecasts a net profit of 14.7 billion to 15.7 billion yuan for 2025, down from 17.88 billion yuan in 2024, representing a decrease of 3.18 billion to 2.18 billion yuan [6][7]. - The company's non-net profit is expected to be between 15.1 billion and 16.1 billion yuan, a decline of 3.65 billion to 2.65 billion yuan from 18.75 billion yuan in 2024 [6][7]. - The average selling price of pigs is projected to drop by approximately 17.3% to around 13.5 yuan per kilogram, impacting overall profitability despite an increase in sales volume [7][8]. Sales Volume and Market Dynamics - In 2025, Muyuan Foods anticipates selling 77.98 million pigs, an increase of about 6.38 million pigs compared to 71.60 million in 2024, reflecting a year-on-year growth of 8.91% [3][7]. - The decline in profits is attributed to falling pig prices rather than a decrease in sales volume, highlighting the impact of market fluctuations on profitability [6][7]. Cost Structure and Competitive Advantage - Muyuan Foods maintains a cost advantage with a breeding cost of approximately 11.6 yuan per kilogram as of December 2025, which is lower than competitors [9][17]. - The company employs a self-breeding model and has integrated its supply chain, which enhances its competitive edge in the industry [11][12][19]. Strategic Initiatives - To counteract the cyclical challenges, Muyuan Foods is expanding internationally, including investments in Vietnam and partnerships with Charoen Pokphand Group for global collaboration [3][21]. - The company has recently passed the hearing for its Hong Kong IPO, which is a crucial step in its international expansion strategy [4][21]. Industry Context - The pig farming industry is experiencing increased concentration and efficiency, which poses challenges for all players, including Muyuan Foods, as they navigate the current market conditions [3][19]. - The overall scale of pig farming in China has reached 70%, indicating a mature market where significant growth may be limited [19][20].

Group 1 - The pace of Henan enterprises planning to list in Hong Kong has significantly accelerated, with three companies advancing their listing processes within a week, which is rare in the history of Henan's capital market [1] - Muyuan Foods, the world's largest pig farming company, has successfully passed the Hong Kong Stock Exchange listing hearing, moving closer to its listing [1] - Hanwei Technology announced its plan to list in Hong Kong, aiming to leverage the platform for international expansion [1] - Jinxing Beer submitted its main board listing application to the Hong Kong Stock Exchange, marking the beginning of local beer companies' engagement with international capital markets [1] Group 2 - The recent wave of listings is driven by a synergy of policies, market conditions, and corporate needs, with the Henan government promoting high-quality development of the private economy and establishing a "green channel" for companies seeking to list [1] - Listing in Hong Kong not only injects capital into enterprises but also encourages them to improve governance structures and management standards according to international norms [2] - Leading companies are utilizing A-shares for high valuation financing while expanding international capital channels through Hong Kong listings, creating a dual empowerment effect in the capital market [2] - The recent surge in Henan enterprises planning to list reflects the province's deeper integration into domestic and international dual circulation, showcasing a transformation of key variables into significant growth for high-quality development [2]

Investment Rating - The report provides an "Increase" rating for the industry, indicating a positive outlook compared to the Shanghai and Shenzhen 300 Index [46]. Core Insights - The report highlights the strengthening of pig prices, with a current price of 12.69 CNY/Kg, reflecting a week-on-week increase of 0.20 CNY/Kg. Factors contributing to this trend include a decrease in sales plans for January and the anticipated impact of a nationwide cold wave starting January 19, which may further boost prices [5][10]. - In the planting sector, corn and soybean prices have shown stability, with corn prices at 2364 CNY/ton (up 0.5% week-on-week) and soybean prices at 4072 CNY/ton (up 0.6% week-on-week). The report expresses optimism for the recovery of planting sector profitability [3][10]. - The pet industry is experiencing increased attention due to major exhibitions, with significant events scheduled in March 2026, which are expected to catalyze new product launches from leading domestic brands [4]. Summary by Sections Livestock - The report notes that pig prices are on the rise, with a current price of 12.69 CNY/Kg, up 1.60% week-on-week and 10.06% month-on-month, although down 19.33% year-on-year. The report suggests that the cold wave and increased demand during the lunar month will be key factors influencing future price movements [5][10]. - Recommended stocks in the livestock sector include Muyuan Foods, Wens Foodstuffs, and others, with a focus on companies that are expected to benefit from the recovery in pig prices [5][40]. Planting - The report indicates that corn and soybean prices are stable, with corn at 2364 CNY/ton and soybeans at 4072 CNY/ton. The planting sector is expected to see a recovery in profitability, particularly benefiting seed companies that focus on high-quality products [3][10]. Pet Industry - Major pet exhibitions are set to take place in March 2026, which are expected to enhance market interest and lead to new product launches from top brands. The report emphasizes the potential for growth in the pet sector due to these events [4][10]. Key Company Coverage - The report includes earnings forecasts and valuations for key companies in the industry, with all covered companies receiving an "Increase" rating. Notable companies include Muyuan Foods, Wens Foodstuffs, and various firms in the pet and agricultural sectors [40].

Core Insights - The report highlights a rebound in pork prices during the consumption peak season, with the average price of lean pigs at 12.49 CNY/kg, up 2.6% week-on-week but down 22.7% year-on-year [6][14]. - The report emphasizes the growth potential of leading feed companies expanding overseas, suggesting a focus on their international business growth [6][16]. Livestock Farming - The average price of 6.5 kg piglets has risen to 330 CNY/head, reflecting a 7.5% week-on-week increase, indicating a positive outlook among farmers for pork prices in the second half of the year [6][14]. - Major recommended companies in the livestock sector include Wen's Food Group and Muyuan Foods, with attention also on Dekang Agriculture and New Hope [6][14]. - The report notes that the industry is in a "tug-of-war" state, with companies possessing cost advantages having a significant competitive edge [6][14]. Dairy Industry - The current price of fresh milk in major production areas is 3.02 CNY/kg, down 0.3% week-on-week and 3.2% year-on-year, while some regions see prices rebounding to 3.3-3.4 CNY/kg [15]. - The report anticipates a continued upward trend in beef prices due to supply constraints, recommending companies like Yuran Dairy and Modern Dairy [15]. Feed and Animal Health - Prices for common and specialty fish and shrimp have continued to rise, driven by tight supply and increased demand as the Spring Festival approaches [16]. - The report suggests that leading feed companies are likely to see market share growth due to their comprehensive advantages, with a focus on international expansion [16]. - In the animal health sector, companies are expanding into pet healthcare, with recommendations for companies like Keqian Biological and Princely Biological [16]. Agricultural Sector - The report indicates that the domestic corn price is 2364 CNY/ton, up 0.5% week-on-week, while soybean meal prices are at 3196 CNY/ton, down 0.9% [18][44]. - The report highlights the importance of biotechnology advancements and industry consolidation in the seed sector, recommending companies like Suqian Agricultural Development and Beidahuang [18]. Market Performance - The agricultural sector underperformed the market by 2.7 percentage points, with the animal health sector showing a 1.2% increase [22]. - The report notes that the livestock sector is experiencing a recovery in profitability, with self-bred pigs showing a profit of 7.39 CNY/head [24].

Investment Rating - The report maintains a "Positive" investment rating for the agriculture industry [5] Core Insights - The report highlights that the recovery in pig prices is driven by inventory replenishment, with prices expected to reach a turning point in Q2 2026 [2][12] - The report emphasizes the structural growth trends in the post-cycle sector, indicating that if the current round of pig production capacity reduction proceeds smoothly, profits in the industry chain are likely to gradually transmit downstream [3][35] Summary by Sections Pig Farming Sector - The report forecasts a significant recovery in pig prices, with the national average price reaching 13 CNY/kg by January 18, 2026, following a structural supply shortage [12] - The report notes that the market's pessimistic expectations regarding pig prices are likely to be corrected, as the supply side shows structural shortages and the average weight of pigs remains at historical lows [9][12] Poultry Sector - White feather broiler prices have shown a slight decline, with the average price at 7.59 CNY/kg as of January 16, 2026, reflecting limited increases in slaughter volumes and rising inventory levels among processing enterprises [16] - Yellow feather broiler prices are expected to remain strong, with price differentials among different types of chickens widening [21] Feed Sector - The report indicates that raw material prices for feed are stabilizing at the bottom, with corn prices rising to 2363.92 CNY/ton and wheat prices at 2515.89 CNY/ton as of January 16, 2026 [25][43] - The demand side shows strong pricing from traders, with some deep processing enterprises increasing purchase prices [25] Investment Recommendations - The report recommends focusing on the pig farming sector, with specific stocks such as Muyuan Foods (002714) and Wens Foodstuff Group (300498) being highlighted for potential investment [3][35] - It also suggests opportunities in the planting chain and pet food sectors, with companies like Suqian Agricultural Development (601952) and Pet Food Company (301498) being noted [3][35]