CHINA PET FOODS(SZ:002891) 3 6 Ke·2025-05-29 01:11Core Viewpoint - The recent surge in the pet economy sector in A-shares, particularly since April 8, has seen significant stock price increases, with some companies experiencing over 200% growth since last September, indicating a strong market interest in this segment [1][4][10]. Group 1: Market Performance - The pet economy sector index has risen nearly 40% since April 8, and has doubled since last September [1]. - Major companies like Zhongchong Co. and Lusi Co. have seen stock prices soar over 200%, while Guibao Biological has increased by over 110% [1]. - Following this surge, the sector experienced a correction starting May 21, with companies like Tianyuan Pet and Lusi Co. dropping over 20% [3]. Group 2: Growth Drivers - The pet industry has shown strong fundamentals, with Guibao Pet and Zhongchong Co. projected to have compound annual revenue growth rates of 27% and 18.9% respectively from 2020 to 2024 [4]. - In Q1 2025, Guibao Biological reported a revenue increase of over 34% and a profit increase of 62%, while Zhongchong Co. saw a 25% revenue increase and a 62% profit increase [4]. - The overall high profitability of the pet industry has been a key factor in the recent market rally [5]. Group 3: Profitability Analysis - As of Q1 2025, Guibao Pet's gross margin stands at 41.6%, significantly higher than Zhongchong Co. and Petty Co. at 32% and 28.6% respectively [6]. - Guibao Pet has successfully reduced its reliance on OEM business, with its own brand sales increasing, allowing it to capture a higher market share in the mid-to-high-end segment [6]. - In contrast, Tianyuan Pet and Yiyi Co. have lower gross margins below 20%, indicating weaker competitive positioning [7]. Group 4: Market Trends - The pet consumption market in urban China is expected to reach 300.2 billion yuan in 2024, reflecting a 7.5% growth from 2023, with a compound annual growth rate of 20% from 2012 to 2024 [11]. - The number of pets in China is projected to grow, with pet cats and dogs reaching 71.53 million and 52.58 million respectively in 2024 [13]. - The market is witnessing a shift towards domestic brands, with Guibao's market share increasing from around 2% to 6% between 2014 and 2023, while foreign brands like Mars and Nestle have seen their market shares decline [14][15]. Group 5: Pricing Dynamics - The average annual consumption per pet is projected to grow at a compound rate of 6.74% from 2017 to 2024, with pet dogs expected to see a 3% increase in spending per pet in 2024 [16]. - Guibao Pet's product pricing has increased, with a compound annual growth rate of 6.5% in pet food prices from 2020 to 2023 [16]. - The trend indicates a potential for simultaneous growth in both volume and price within the pet industry, which is relatively rare in the current economic climate [17]. Group 6: Future Outlook - Despite recent price surges leading to high valuations, the underlying growth logic for the pet sector remains intact, with expectations for a potential market rebound post-July as tariff issues clarify [19]. - The market is likely to favor companies with strong performance and profitability, distinguishing them from those that have recently experienced inflated valuations without solid fundamentals [19].