Group 1 - The pet economy concept stocks experienced a significant afternoon surge, with Yi Yi Co., Ltd. hitting the daily limit up [1] - Jie Ya Co., Ltd. and Tian Yuan Pet both rose over 10%, indicating strong market interest in the pet industry [1] - Other companies such as Chuang Yuan Co., Ltd., Yi Zhi Mo Yu, Lu Si Co., Ltd., Pei Ti Co., Ltd., and Qu Dong Li also saw increases, reflecting a broader trend in the sector [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]

Investment Rating - The report maintains a rating of "Accumulate" for the company [7]. Core Views - The company has seen a significant improvement in gross margin due to enhanced focus on staple food products, despite a decline in overall revenue [2][3]. - The company is expanding its product lineup in staple foods, which is expected to become a key growth driver in the future [3][4]. - The net profit margin has improved in Q2 2025, indicating better profitability [4]. Summary by Sections Financial Performance - In H1 2025, the company achieved revenue of 728 million yuan, a year-on-year decrease of 13.94%, and a net profit of 79 million yuan, down 19.23% [2]. - Q2 2025 saw revenue of 399 million yuan, a decline of 13.56% year-on-year, but net profit increased by 1.15% to 57 million yuan [2]. Product and Market Analysis - Domestic self-owned brand performance is stable, with the "Jueyan" brand showing rapid growth [3]. - The company is increasing its focus on staple food products, launching a series of new offerings such as air-dried, baked, and freeze-dried foods [3]. Margin and Cost Analysis - The gross margin for H1 2025 was 31.98%, improving to 34.76% in Q2 2025, with a year-on-year increase of 6.75 percentage points [4]. - The net profit margin for Q2 2025 was 14.27%, reflecting a year-on-year increase of 2.08 percentage points [4]. Profit Forecast and Valuation - The profit forecasts for 2025-2027 have been adjusted to 187 million, 221 million, and 249 million yuan respectively, with corresponding EPS of 0.75, 0.89, and 1.00 yuan [5][6]. - The current stock price corresponds to a P/E ratio of 24 for 2025, 21 for 2026, and 18 for 2027 [5].

Core Viewpoint - The feed sector experienced a slight decline of 0.09% on September 2, with LuDe Environment leading the drop. The Shanghai Composite Index closed at 3858.13, down 0.45%, while the Shenzhen Component Index closed at 12553.84, down 2.14% [1]. Group 1: Market Performance - The feed sector's individual stock performance showed mixed results, with LuSi Co., Ltd. closing at 20.70, up 1.02%, and HaiDa Group at 61.27, up 0.82% [1]. - The overall trading volume in the feed sector was notable, with stocks like DaBeiNong and TangRenShen showing significant trading activity, with volumes of 102.10 thousand and 31.88 thousand respectively [1]. Group 2: Capital Flow - The feed sector saw a net outflow of 204 million yuan from main funds, while retail investors contributed a net inflow of 174 million yuan [2]. - The capital flow data indicates that speculative funds had a net inflow of 29.51 million yuan, suggesting a mixed sentiment among different types of investors [2].

Investment Rating - The investment rating for the agriculture, forestry, animal husbandry, and fishery industry is "Positive" (maintained) [3] Core Viewpoints - The swine industry is experiencing high-quality development with significant policy transformations aimed at protecting farmers' rights and stimulating enterprise innovation. Future growth stocks will likely focus on technological content and innovative models that balance farmer interests [4][12] - The overall profitability of listed pig companies has significantly increased due to a stable pig price year-on-year and a substantial decrease in costs. Although pig prices may face pressure in the second half of the year, the trend of improving efficiency suggests that profitability will remain strong [4][12] - The poultry sector is facing a persistent contradiction of "high capacity, weak consumption," leading to losses that force breeding farms to reduce capacity. Integrated enterprises and contract farming are expected to gain market share [5][13] - The feed sector is recommended to focus on Hai Da Group, which is expected to see growth due to improved management and increased capacity utilization [6][14] - The pet industry is witnessing a concentration of market share among leading brands, with potential growth opportunities for mid-tier brands. The impact of tariffs on exports is expected to diminish over time [7][16] - The agricultural sector is closely monitoring the effects of US-China trade negotiations, with expectations of tightening soybean supply and potential price increases for soybean meal [8][17] Summary by Sections 1. Swine - Latest pig price is 13.70 CNY/kg (down 0.01 CNY/kg month-on-month), with an average slaughter weight of 127.83 kg (down 0.15 kg month-on-month) and a price of 445 CNY for 15 kg piglets (down 18 CNY month-on-month). Short-term price declines may be due to policy-driven weight reductions [3][12] - The industry is undergoing profound policy transformations, focusing on protecting farmers' rights and stimulating innovation. Companies with cost advantages and strong connections with farmers are expected to enjoy excess profits and valuation premiums [4][12][13] 2. Poultry - As of September 1, the price of chicken seedlings in Yantai is 3.45 CNY/piece (down 5.5% month-on-month) and the price of broiler chickens is 3.55 CNY/kg (down 1.39% month-on-month) [5][13] - The white feather chicken industry is facing ongoing challenges of high capacity and weak consumption, leading to a reduction in breeding capacity among chicken farms [5][13] 3. Feed - The feed sector is recommended to focus on Hai Da Group, which is expected to benefit from industry recovery and improved management effects [6][14] 4. Pets - The pet industry is characterized by a stable four-brand dominance, with increasing concentration expected. The impact of tariffs on exports is anticipated to lessen, and leading companies are expected to maintain high growth rates [7][16] 5. Agricultural Products - The agricultural sector is closely watching the impact of US-China trade negotiations, with expectations of tightening soybean supply and potential price increases for soybean meal [8][17] 6. Market and Price Situation - The Shanghai and Shenzhen 300 Index closed at 4497, up 2.71% from the previous week, while the agriculture, forestry, animal husbandry, and fishery index closed at 3001, up 2.02% [18][21]

Core Viewpoint - Petty Co. has established its Cambodia factory as a key capacity base in recent years, expecting to enter profitability in 2024 and maintain a positive profit trend in the first half of 2025 as operational efficiency improves [2] Summary by Categories - **Company Performance** - The Cambodia factory is projected to become profitable in 2024 [2] - A good profit trend is anticipated to continue into the first half of 2025 [2] - The company aims to enhance operational efficiency to contribute sustained profits [2]

Group 1 - The company primarily exports pet products to overseas markets using the ODM model, with the Southeast Asia factory being a key production base [1] - The company plans to increase the pet snack production capacity by 5,000 tons at the Southeast Asia factory to meet future development needs, based on confidence in market space and new product trends [1] - The Southeast Asia factory has strong advantages in resource endowment, production conditions, and costs, with continuous improvement in operating conditions [1] Group 2 - The Cambodian factory is a key production base that the company has focused on in recent years, expected to enter profitability in 2024 and maintain a good profit trend in the first half of 2025 [1] - The company aims to continuously contribute profits through improved operational efficiency at the Cambodian factory [1]

Core Viewpoint - Petty Co. has no plans to build a factory in Hainan and will focus on launching new products in key growth categories in the second half of 2025 [2]. Group 1: Product Development and Innovation - In the second half of 2025, Petty's key brand, Jueyan, will continue to introduce more new products focusing on four high-growth categories: staple foods, chewable snacks, canned staple foods, and health freeze-dried products [2]. - The Wenzhou factory's baking grain production line is now ready for formal production, and the company will fully promote the channel development for baking grain products [2]. Group 2: Strategic Planning - The company currently has no plans to establish a factory in Hainan [2].

Summary of Petty Co. Conference Call Company Overview - **Company**: Petty Co. - **Industry**: Pet Food and Snacks Key Points Overseas Business Performance - Petty Co. reported stable overseas shipment volumes in Q2 2025 compared to the same period last year, indicating steady overseas demand [2][3] - The company plans to cover tariffs through cost-plus pricing and expects overseas clients to share some of the costs, maintaining a positive outlook on overseas business profitability recovery in the medium to long term [2][3] Gross Margin Insights - Gross margins for three product categories—plant-based gel, bark gel, and nutritious meat snacks—ranged from 3% to 6.75% in Q2, benefiting from cost control and economies of scale at overseas factories [2][3] - Stable raw material prices and the depreciation of the Vietnamese Dong contributed positively to margins, with expectations for this trend to continue in the second half of the year [2][7] Domestic Market Growth - The domestic market saw significant growth, with the Jieyan brand achieving over 40% growth, becoming a key growth driver [2][5] - The company is shifting focus from the Ziliang agency business to the Jieyan brand, increasing investment in this area [2][5] - The Wenzhou baking grain production line has been launched to enhance the staple food product line and target the domestic staple food market [2][5] Future Orders and Revenue Expectations - Q3 orders are expected to be flat year-over-year, but revenue may fall short of last year's due to tariff impacts; however, Q4 is anticipated to see a recovery in export revenue [2][6][8] - The company plans to promote baking grain products in the domestic market in the second half of the year, with the New Zealand staple food potentially delayed until the end of the year or early next year [2][6] Sales and Marketing Strategy - Sales expenses will focus on supporting the new product "Yuanliwan" and the Jieyan brand, with a target to keep the sales expense ratio around 30% [2][9] - Significant pre-launch investments were made before the 618 shopping festival, with additional support planned for baking grain products in the second half of the year [2][9] Online and Offline Sales Channels - Online channels contribute over 70% of total sales, with major platforms being Taobao and JD.com; Douyin and Xiaohongshu are used primarily for brand promotion [2][4][12] - The Jieyan brand performs exceptionally well online, while offline sales are mainly through large supermarkets [2][4][12] Product Development and Future Plans - The Smart Balance brand is set to enter the domestic market after obtaining regulatory approval, focusing on mid to high-end positioning [2][4][18][24] - New Zealand staple food is expected to launch by the end of the year, with a strategy to first enter online channels before expanding to offline new retail channels [2][5][17] - The company plans to introduce multiple staple food products in 2025 to establish a foundation for significant growth in 2026 [2][26][27] Financial Outlook - The free brand is expected to continue incurring losses in 2025, but these losses are projected to narrow compared to 2024 [2][14] - The company aims for a breakeven point in the domestic market if revenues reach between 700 million to 800 million yuan [2][27] Consumer Education and Marketing - Petty Co. utilizes social media platforms like Xiaohongshu and Douyin for consumer education, leveraging influencers to enhance brand awareness [2][22][23] Conclusion - Overall, Petty Co. maintains a positive outlook for both domestic and overseas markets, focusing on product diversification and effective cost management to drive future growth and profitability [2][26][27]

Investment Rating - The investment rating for Petty Co., Ltd. is maintained as "Buy" [4] Core Views - The report highlights that the company's overseas business is under pressure due to tariff impacts, but the gross profit margin is steadily increasing. The company reported a revenue of 728 million yuan for H1 2025, a year-on-year decrease of 13.94%, and a net profit attributable to the parent company of 79 million yuan, down 19.23% year-on-year. However, the second quarter showed signs of recovery with a revenue of 399 million yuan, a decrease of 13.56%, but a slight increase in net profit by 1.15% year-on-year [4][5] Financial Performance - For H1 2025, the company's gross profit margin was 31.98%, up 5.63 percentage points year-on-year, while the net profit margin was 10.87%, down 0.71 percentage points. The increase in expenses was attributed to higher sales and management expenses due to brand investments and operational costs in New Zealand [5] - The company expects net profits for 2025-2027 to be 210 million, 243 million, and 284 million yuan respectively, with corresponding EPS of 0.84, 0.98, and 1.14 yuan. The current stock price corresponds to P/E ratios of 21.7, 18.7, and 16.0 times for the respective years [4][8] Product Performance - The report indicates that all product categories have seen an increase in gross profit margins, particularly in the staple food and wet food segments, driven by strong sales of the "Jueyan" dry food products. The revenue for various product lines in H1 2025 showed mixed results, with significant declines in some categories but growth in nutritional meat snacks [6][7] Strategic Initiatives - The company is focusing on launching new products across its brands. "Jueyan" introduced several new freeze-dried products for small dogs and plans to expand its product lines in H2 2025. "Haoshijia" is also launching new products to fill market gaps in the mid-range price segment, enhancing brand synergy [7]