Investment Rating - The investment rating for the pet food industry is "Positive" and maintained [10] Core Insights - The 2025 Asia Pet Expo highlights innovation in production processes, with a continued interest in baked food from 2024, and the introduction of fresh steamed, enzymatic, and freeze-dried products [2][6] - Overseas brands like Royal Canin and Pro Plan are focusing on localized products to meet specific consumer needs, while domestic leaders such as Guobao and Zhongchong are innovating based on pet health requirements [2][6] - Future competition in the industry will hinge on production processes and R&D capabilities, with companies deeply engaged in canine and feline research likely to build strong product barriers [2][6] Summary by Sections Competitive Trends - The market is becoming increasingly concentrated among leading brands, with the CR10 of the pet food industry rising from 28.3% in 2019 to 32.7% in 2024, indicating a trend towards consolidation [7][17] - Intense competition exists among mid-tier brands, with many small enterprises facing significant pressure due to product homogeneity and online sales channels, leading to a wave of industry restructuring [7][17] - The number of bankruptcy and restructuring cases in the pet industry has surged, with 151 cases reported in 2024, primarily involving small to medium-sized enterprises [17][19] Overseas Brands - Overseas brands are developing comprehensive nutritional solutions for pets throughout their life cycles, maintaining high market shares in China [25][26] - Royal Canin launched breed-specific products tailored to local preferences, such as a specialized formula for Corgis, emphasizing scientific nutritional approaches [25][26] - Pro Plan has established a platform for professional veterinary consultations and educational sessions at the Asia Pet Expo, enhancing its brand authority in pet nutrition [28][29] Domestic Brands - Domestic brands are focusing on continuous innovation in production processes, with significant advancements in enzymatic, freeze-dried, and fresh steamed products [8][33] - Leading domestic brands are enhancing their core competitiveness through innovative ingredient formulations and targeted nutritional solutions for pets at different life stages [8][33] - The trend of using fresh meat as a core selling point is evolving, with brands exploring diverse protein sources and innovative feeding experiences [8][33]

Market Overview - The feed sector experienced a decline of 0.53% on September 12, with Petty Holdings leading the drop [1] - The Shanghai Composite Index closed at 3883.69, up 0.22%, while the Shenzhen Component Index closed at 12996.38, up 0.13% [1] Individual Stock Performance - Aonong Biological (603363) saw a significant increase of 4.01%, closing at 5.45, with a trading volume of 1.52 million shares and a turnover of 820 million yuan [1] - Jin Xin Nong (002548) rose by 3.64%, closing at 5.13, with a trading volume of 1.25 million shares and a turnover of 653 million yuan [1] - Petty Holdings (300673) declined by 2.52%, closing at 18.57, with a trading volume of 56,500 shares and a turnover of 106 million yuan [2] Capital Flow Analysis - The feed sector experienced a net outflow of 231 million yuan from institutional investors, while retail investors saw a net inflow of 140 million yuan [2] - Aonong Biological had a net outflow of 37.79 million yuan from institutional investors, while retail investors contributed a net inflow of 4.36 million yuan [3] - Jin Xin Nong had a net inflow of 11.78 million yuan from institutional investors, but a net outflow of 25.86 million yuan from retail investors [3]

Investment Rating - The report maintains a "Positive" investment rating for the agricultural products industry [13]. Core Insights - The swine breeding industry is transitioning from a rapid growth phase to a stable phase, with medium to long-term capacity control becoming the new norm, positively impacting the industry. Profits for quality enterprises are expected to significantly increase, with a favorable long-term outlook for the sector [4][21]. - Key recommendations include Muyuan Foods, Wens Foodstuff Group, Dekang Agriculture, Shennong Group, and Juxing Agriculture in the swine breeding sector. In the pet food segment, the report highlights the rapid growth of domestic brands such as Guibao Pet and Zhongchong Co., Ltd. The feed industry is also experiencing a recovery, with Haida Group's domestic market share increasing and overseas business growing rapidly [4][21]. Summary by Sections Swine Breeding - In the first half of 2025, the revenue of listed companies in the swine breeding sector increased by 19% year-on-year, with a non-recurring net profit growth of 512%. The average swine price decreased by 4% year-on-year, but profits surged due to improved breeding costs. The industry's free cash flow improved significantly, totaling approximately 18.3 billion yuan, compared to a negative 3.7 billion yuan in the same period last year [8][23]. - The average profit for self-breeding and self-raising was about 73 yuan per head, a significant improvement from a loss of 25 yuan per head in the previous year [23]. Feed Industry - The feed sector saw a revenue increase of 13% year-on-year in the first half of 2025, with a 70.9% increase in non-recurring net profit. The total feed production reached 159 million tons, up 8% year-on-year. Haida Group's feed sales volume grew by 26% year-on-year, and the company is expected to see further growth in shrimp and crab feed in the third quarter [9][22]. Pet Food - The pet food sector's revenue grew by 22.4% year-on-year in Q2 2025, with a 19.2% increase in non-recurring net profit. Domestic sales for Guibao Pet and Zhongchong Co., Ltd. are expected to grow by over 40% in Q2. However, exports of pet snacks faced a decline due to tariffs, with a 52% drop in exports to the U.S. [10][22].

Core Insights - The importance of the "14th Five-Year Plan": The upcoming "14th Five-Year Plan" is expected to significantly impact China's economic and social development over the next five years, shifting focus from production to a balance between production and consumption due to the current issue of insufficient effective demand [1] - Strengthening consumption policies: Starting in 2024, consumption policies will be significantly enhanced, including the allocation of special government bond funds to support consumption upgrades. Continued funding is expected in 2025 and 2026 [1] - Potential of service consumption: China's service consumption still lags behind developed economies, indicating a substantial opportunity for growth in this sector to stimulate consumer interest and optimize the consumption environment [1] - Rise of technology consumption: With a rapid technological development and an engineering talent surplus, products like robotic vacuum cleaners and drones are gaining market attention, likely creating new consumer demand [1] - Optimization of the overall consumption mechanism: Measures such as consumption tax reform will encourage local governments to transition from production-oriented to service-oriented, promoting the internationalization of quality consumption companies and enhancing residents' consumption capacity [1] Investment Recommendations - Food and Beverage: Recommended companies include Dongpeng Beverage and Lihigh Food, with a focus on Youran Dairy and Bairun Co [2] - Service Sector: Recommended companies include Guming, Mixue Group, and Bubugao, with a focus on Zhongsheng Holdings [2] - Light Industry: Companies to watch include Hengfeng Paper and Xilinmen [3] - Trendy Toys: Recommended companies include Pop Mart and Blokus [4] - Home Appliances: Recommended companies include Midea Group, Haier Smart Home, TCL Electronics H, Roborock, and Ecovacs, with a focus on Yingshi Innovation [5] - Agriculture: Recommended companies include Zhongchong Co, Petty Co, Muyuan Foods, and Haida Group [11] - Textile and Apparel: Recommended companies include Anta Sports, Xtep International, 361 Degrees, and Hailan Home, with a focus on Li Ning and Sanfu Outdoor [11] Report Content Analysis - Expanding consumption share: The report emphasizes that expanding consumption share is essential for achieving Chinese-style modernization, as China's consumption rate is significantly lower than that of developed countries [9] - Shift in fiscal spending: During the "14th Five-Year Plan" period, fiscal spending will shift from material investments to human capital investments, increasing support for education, healthcare, and housing [9] - Promotion of common prosperity: The report highlights the need for income distribution reform and the promotion of the Zhejiang common prosperity model to achieve balanced development [9] - Consumption tax reform: The report suggests that consumption tax reform will help local governments transition from production-oriented to service-oriented, enhancing the consumption environment [9] - Transition from traditional to new consumption: The report analyzes the maturation of traditional consumption markets and the rise of new consumption, which is characterized by a focus on quality and personal satisfaction [9] - Stimulating interest in service consumption: The report indicates that the shift from physical to service consumption is crucial for expanding domestic demand, with growing demand for events and performances benefiting local consumption [9]

Core Viewpoint - Zhongchong Co., Ltd. has shown significant stock performance with a year-to-date increase of 65.91%, despite a recent slight decline in the last five trading days [1][2]. Financial Performance - For the first half of 2025, Zhongchong Co., Ltd. achieved a revenue of 2.432 billion yuan, representing a year-on-year growth of 24.32%. The net profit attributable to shareholders was 203 million yuan, reflecting a growth of 42.56% [2]. Stock Market Activity - As of September 8, Zhongchong's stock price was 58.65 yuan per share, with a market capitalization of 17.851 billion yuan. The stock experienced a trading volume of 1.23 billion yuan and a turnover rate of 0.70% [1]. - The company has seen a net inflow of main funds amounting to 5.3072 million yuan, with significant buying activity from large orders [1]. Shareholder Information - As of July 18, the number of shareholders for Zhongchong Co., Ltd. was 36,500, an increase of 7.63% from the previous period. The average number of circulating shares per shareholder decreased by 7.09% to 8,345 shares [2]. - The company has distributed a total of 322 million yuan in dividends since its A-share listing, with 264 million yuan distributed in the last three years [3]. Ownership Structure - As of June 30, 2025, Hong Kong Central Clearing Limited was the fourth-largest circulating shareholder, holding 21.332 million shares, an increase of 7.8111 million shares from the previous period. New shareholders include Shenyin Wanguo New Power Mixed A [3].

Investment Rating - The industry investment rating is "Positive" (maintained) [1] Core Views - The report highlights that the profitability of the breeding chain is expected to see significant growth in H1 2025, with the pet sector maintaining its high prosperity [3][20] - The preliminary ruling on anti-dumping measures against EU pork imports is anticipated to drive domestic pork prices upward, presenting a good opportunity for investment in the pig farming sector [4][14] - The report emphasizes a dual driving force from both fundamental and policy aspects, suggesting that pig prices are likely to rise in H2 2025, improving the investment logic in the pig farming sector [20] Summary by Sections Weekly Observation - The Ministry of Commerce has announced preliminary anti-dumping measures on EU pork imports, with a guarantee deposit rate ranging from 15.6% to 62.4% [4][13] - The domestic pork and pork offal import volume reached 1.15 million tons in H1 2025, with EU imports accounting for 52% [14][16] Market Performance (Sept 1 - Sept 5) - The agricultural index underperformed the market by 0.15 percentage points, with the Shanghai Composite Index down 1.18% and the agricultural index down 1.32% [6][24] - The pet food sector led the gains among sub-sectors, with notable increases in individual stocks such as Yuegui Co. (+13.19%) and Honghui Fruits (+9.23%) [6][24][29] Price Tracking (Sept 1 - Sept 5) - The average price of live pigs was 13.77 yuan/kg, up 0.11 yuan/kg from the previous week, while the average price of piglets was 25.4 yuan/kg, down 1.74 yuan/kg [7][35] - The price of corn futures increased by 1.46% to 2219.00 yuan/ton, and soybean meal futures rose by 1.60% to 2536.00 yuan/ton [47][48] Key News (Sept 1 - Sept 5) - The Ministry of Agriculture reported a 5.3% month-on-month increase in the slaughter volume of designated pig slaughtering enterprises in July 2025 [30] - The report indicates that the domestic pig farming sector is expected to benefit from the anti-dumping measures, leading to a potential increase in domestic pork prices [4][14] Investment Recommendations - Recommended stocks in the pig farming sector include Muyuan Foods, Wens Foodstuff Group, and Juxing Agriculture [20] - In the feed sector, companies like Haida Group and New Hope Liuhe are recommended due to strong domestic and overseas demand [20][23]

Industry Overview - The 27th Asia Pet Expo attracted over 510,000 visitors, showcasing the robust growth of China's pet economy, with a market size projected to reach 811.4 billion yuan by 2025, growing at a compound annual growth rate (CAGR) of 25.4% from 2015 to 2023 [1] - The pet-related business market in China has expanded from 97.8 billion yuan in 2015 to 592.8 billion yuan in 2023, indicating a significant upward trend [1] Company Performance - The pet sector achieved revenue of 6.381 billion yuan in the first half of 2025, a year-on-year increase of 22.03%, with net profit reaching 660 million yuan, up 20.28% [1] - Leading company Guobao Pet reported revenue of 3.221 billion yuan and net profit of 378 million yuan, with growth rates of 32.72% and 22.55% respectively [2] - Zhongchong Co. followed closely with revenue of 2.432 billion yuan and net profit of 203 million yuan, marking a 42.56% increase in net profit, the highest in the industry [2] - Petty Co. experienced a decline in both revenue and net profit, reporting 728 million yuan and 79 million yuan, down 13.94% and 19.23% respectively, attributed to U.S. tariff policies affecting overseas orders [3] - Lusi Co. reported an 11.32% increase in revenue to 391 million yuan but a 12.07% decrease in net profit to 30.46 million yuan due to falling product prices [3] Market Trends - The pet economy is driven by a generational shift in consumer attitudes, with younger generations (90s and 00s) becoming the primary pet owners, leading to a growing "it economy" around pets [5] - The pet food market holds a 52.8% share, followed by pet medical services at 28.0%, with increasing penetration rates in pet diagnosis, training, insurance, and travel [5] - The average cost of pet medical services is rising due to advancements in medical technology and diversified drug supply [5] Regulatory Environment - Recent policies from the Ministry of Agriculture and Rural Affairs and the State Administration for Market Regulation have focused on establishing standards for the pet industry [6] - Local governments are incorporating pet industry development into their plans, with initiatives aimed at promoting collaboration across various sectors [6] Investment Activity - The pet industry has seen 634 financing events as of the first quarter of 2025, with online platforms being the most active [6] - The pet economy concept index has risen by 43.21% year-to-date, indicating strong interest from the capital market [7]

Group 1: Industry Overview - The pet market in China is experiencing robust growth, with the urban dog and cat consumption market size increasing from 170.8 billion yuan in 2018 to 300.2 billion yuan in 2024, reflecting a compound annual growth rate (CAGR) of 9.86% [6][9] - The pet food segment remains the largest market share at 52.8% in 2024, while the medical market holds 28.0% [6][9] - The concentration of pet food brands in China is relatively low compared to the U.S., with the top ten brands accounting for only 26% of sales in 2024, indicating potential for new entrants [15][18] Group 2: Product Strategies - Companies are adopting multi-brand strategies to diversify their product offerings, with Guobao Pet's brands targeting different market segments, including high-end and low-end products [28][30] - Zhongchong's pet food revenue from snacks is projected to reach 70% in 2024, while its main food revenue is steadily increasing [32][38] - Petty's plant-based chewing gum and meat snacks are significant revenue contributors, with plant-based products accounting for 36.6% of total revenue in 2024 [42][43] Group 3: Research and Development - Guobao Pet leads in R&D spending, with its R&D expenses projected to grow from 44.05 million yuan in 2020 to 85.48 million yuan in 2024 [2][3] - Zhongchong's R&D expenses are expected to increase by 52% year-on-year to 72.68 million yuan in 2024 [2][3] - Lusi's R&D expense ratio is the highest in the industry, reaching 3.04% in 2024 [2][3] Group 4: Capacity Expansion - Companies are expanding their production capacities globally, with Zhongchong establishing factories in North America and Guobao Pet expanding in Thailand [2][3] - Petty's production facilities are distributed across New Zealand, China, and Southeast Asia, while Lusi is developing a factory in Cambodia [2][3] Group 5: Marketing Strategies - Companies are increasing their marketing expenditures to enhance brand influence, with Guobao Pet's sales expense ratio exceeding 20% in 2024 [2][3] - Zhongchong is actively participating in co-branding activities and leveraging authoritative media endorsements [2][3] - Petty focuses on scenario-based marketing, while Lusi emphasizes participation in industry exhibitions [2][3] Group 6: Financial Performance - Guobao Pet shows the highest revenue and net profit growth rates from 2021 to 2024, with a revenue CAGR of 26.8% and a net profit CAGR of 64.2% [2][3] - In 2024, Guobao Pet's domestic revenue is expected to account for 67.7% of its total revenue, while Petty's overseas revenue is projected to be 82.6% [2][3] - As of September 4, 2025, Guobao Pet has the largest market capitalization at 39.6 billion yuan, with a price-to-earnings (PE) ratio of 51x [2][3]

Group 1 - The pet economy concept stocks in the A-share market experienced significant gains, with Jieya Co., Ltd. rising over 10% [1] - Yiyi Co., Ltd. hit the daily limit with a 10% increase [1] - Tianyuan Pet increased by over 9%, while Lusi Co., Ltd. rose over 8% [1] Group 2 - Peti Co., Ltd. saw an increase of over 7%, and Chuangyuan Co., Ltd. rose over 6% [1] - Guai Bao Pet and Suo Bao Protein both increased by over 5% [1] - Zhongchong Co., Ltd. and Yuanfei Pet both rose over 4% [1]

Core Insights - The domestic pet industry is transitioning from scale expansion to quality competition, with brand building and diversified market layouts becoming key drivers of profitability [1][9] Group 1: Performance of Leading Companies - Several leading companies in the pet industry reported positive growth in their half-year results, with companies like Guibao Pet and Zhongchong Co. showing significant revenue and net profit increases [2][3] - Guibao Pet led with a revenue of 3.221 billion yuan, a year-on-year increase of 32.72%, and a net profit growth of 22.55% to 378 million yuan [2] - Zhongchong Co. achieved a net profit growth rate of 42.56%, reaching 203 million yuan, with revenue also increasing by 24.32% to 2.432 billion yuan [2] Group 2: Growth in Pet Food Segment - The pet food segment remains the core revenue growth area for leading companies, with Guibao Pet's pet food revenue reaching 1.883 billion yuan, a year-on-year increase of 57.09% [3] - Zhongchong Co.'s pet food revenue surged by 85.79% to 783 million yuan, while Yuanfei Pet reported a total revenue of 791 million yuan, with pet food business revenue growing by 55.39% [3] Group 3: Brand Building and Market Diversification - Companies are increasingly focusing on brand building, particularly their own brands, reflecting growing recognition of domestic pet brands among consumers [4] - Guibao Pet's self-owned brand business significantly contributed to its revenue growth, with its main brand "Maifudi" increasing market share from 2.4% to 6.2% from 2015 to 2024 [4] - Lusi Co. launched a new brand "Miaoguan" targeting high cost-performance products, while also enhancing its existing brand through innovation [4] Group 4: International Market Expansion - Leading companies are diversifying their market layouts by expanding into overseas markets to mitigate risks associated with single market fluctuations [5][6] - Zhongchong Co. reported a 17.61% year-on-year increase in overseas revenue to 1.575 billion yuan, accounting for 64.75% of total revenue [5] - Lusi Co. also saw overseas revenue growth of 19.25% to 246 million yuan, with plans to optimize production capacity and expand into international markets [6] Group 5: Performance Declines in Some Companies - Not all companies experienced growth; Petty Co. reported a revenue decline of 13.94% to 728 million yuan and a net profit drop of 19.23% to 79.1 million yuan [7] - Lusi Co. experienced revenue growth of 11.32% to 391 million yuan but saw a net profit decrease of 12.07% to 30.5 million yuan, attributed to declining sales prices [7] - Despite the decline, Petty Co. noted improvements in operational quality, with a focus on long-term advantages in product development and international supply chains [8]