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].
德康农牧（02419）：星星之火，可以燎原