Core Insights - The report emphasizes the positive outlook for both the new economy and the livestock cycle, indicating a favorable economic environment for these sectors [6]. Industry Analysis - The report titled "New Economy and Livestock Cycle, Mid-Year Prosperity is Good" highlights the resilience and growth potential in the agricultural sector, particularly in new consumption trends related to pets and the livestock industry [6]. - The analysis suggests that the current economic conditions are conducive to growth, with a focus on identifying opportunities within the pet consumption market and the post-cycle of livestock farming [3][6]. Research Contributions - The authors, Wang Yanjun and Lin Yidan, have contributed to the understanding of the agricultural sector through their annual report, which aims to uncover the prosperity within the industry [3][6].

Industry Overview - The pig farming sector is entering a new cycle due to the simultaneous decline in pig production capacity and the turning point in chicken prices, with a stronger supply-demand imbalance leading to potential price drops and reduced profits for farmers [1] - The supply side shows steady growth in market pig supply and increasing fat pig inventory, while the demand side is currently weak due to the summer off-season, resulting in a challenging pricing environment [1] - Policies are being implemented to optimize production capacity, including a reduction in the target for breeding sows by 1 million to 39.5 million and stricter environmental regulations [1] Chicken Industry Insights - The lowest point for yellow chicken prices may have passed, with expectations for marginal recovery in the second half of the year due to improving consumer demand and seasonal consumption patterns [2] - The current yellow chicken production capacity is at a low level, and the price elasticity is primarily influenced by demand-side changes, with potential for price increases in 2025 [2] - The industry is facing challenges with many producers experiencing losses, which may limit their willingness to invest in new stock, while recent bankruptcies among top companies could further reduce supply [2] Company Analysis Pig Farming Business - The company is integrating farmer resources and innovatively entrusting the breeding of sows to farm owners, which enhances farmer participation and allows for rapid expansion of output [3] - The company has developed a competitive breeding system that reduces the age at which pigs are ready for market by 12 days and lowers feed conversion ratios, resulting in significant cost advantages [3] - Through precise management practices, the company has achieved a reduction in feed consumption per sow and improved feed formulation, maintaining industry-leading cost levels despite unfavorable raw material conditions [3] Chicken Business - The company has established a leading research and development system in yellow chicken breeding, with a diverse genetic resource pool that meets market demands [4] - The company's market share in yellow chicken has doubled from 1.3% in 2018 to 2.6% in 2024, driven by an optimized product matrix [4] - The company is focusing on developing medium and slow-growing chicken products to align with changing consumer preferences and improve product quality [4] Slaughtering Business - The company is expanding its slaughtering and processing operations to create a comprehensive food ecosystem, leveraging vertical integration to enhance efficiency [5] - Collaborations with leading international firms are being utilized to adopt advanced technologies and management practices in food manufacturing [5] Investment Outlook - The new cycle logic in the pig farming sector is strengthening, with expectations of production capacity fluctuations and clearer cyclical trends [6] - The company is projected to achieve an average profit of approximately 300 RMB per pig, supporting a market valuation of 330 billion RMB based on expected output [6] - Given the anticipated market conditions, the company's stock price could see significant upside potential, with a target price exceeding 140 RMB, translating to over 154 HKD [6]

Group 1 - The SW Agricultural, Forestry, Animal Husbandry and Fishery industry rose by 5.02% from January to May 2025, outperforming the CSI 300 index by approximately 7.43 percentage points [13][14] - Most sub-sectors recorded positive returns, with only planting and fishery sectors showing negative returns of -1.58% and -0.07% respectively [14] - Approximately 70% of stocks in the industry achieved positive returns, with three stocks increasing over 100%, the highest being Yizhi Magic Yam at 209.66% [15] Group 2 - The overall PB of the SW Agricultural, Forestry, Animal Husbandry and Fishery industry increased from a low of 2.31 times at the beginning of the year to 2.68 times, with a current PB of approximately 2.66 times as of June 13, 2025, reflecting a 15% recovery from the low [20] - The pig breeding sector is expected to see a gradual recovery in supply, with the number of breeding sows reaching 40.38 million heads by the end of April 2025, slightly above the normal holding capacity [21][23] - The average price of pigs as of June 13, 2025, was 14.04 yuan/kg, down 10.8% from the beginning of the year and 26.1% year-on-year, with expectations for a price rebound in Q4 2025 [27] Group 3 - The total feed production in China is expected to rebound in 2025 after a decline in 2024, with a total production of 49.2 million tons in the first two months of 2025, a year-on-year increase of 9.6% [54] - The average price of corn in China rose from approximately 2,122 yuan/ton at the beginning of the year to over 2,400 yuan/ton, reflecting a 13.3% increase [56] - The pet health market is anticipated to grow rapidly, with significant expansion potential in the domestic market for pet food and supplies, benefiting quality domestic leaders [5][6]

Core Viewpoint - The livestock industry is facing significant challenges, with prices for various meats, including pork, chicken, and lamb, declining due to oversupply and weak consumer demand [2][4][10]. Group 1: Price Trends - Pork prices have dropped below 7 yuan per kilogram, marking a new low for the year, and while the decline has eased somewhat after government intervention, the outlook remains bleak [2]. - Egg prices have fallen below 3 yuan, leading to losses for some producers, while wholesale chicken prices have decreased by 2.3% year-on-year [4]. - Lamb prices have also declined, with a 0.5% year-on-year drop, although beef prices have seen a slight increase of 3.5% [4]. Group 2: Supply Dynamics - The livestock sector is experiencing oversupply, particularly in the pig and poultry markets, with pig production remaining above 40 million heads for 11 consecutive months [4][7]. - The increase in production capacity is attributed to previous high prices that incentivized farmers to expand their operations, leading to significant supply pressure [4][7]. Group 3: Technological Advancements - Improvements in breeding and farming techniques have led to increased meat production, with optimized breeding capabilities resulting in stable pork supply despite a reduction in production capacity [7]. - Similar advancements in sheep farming have also contributed to a surplus in lamb supply [7]. Group 4: Import Factors - While imports of pork and poultry have a limited impact, beef imports have significantly increased due to lower prices abroad compared to domestic production costs [8]. - The rising availability of cheaper imported beef, coupled with declining prices of pork and poultry, has constrained domestic beef demand [8]. Group 5: Consumer Demand - Consumer demand for meat is recovering slowly, with overall growth in personal consumption being limited due to economic constraints [10]. - The lack of timely demand growth exacerbates supply pressures, making it difficult for the livestock industry to reduce excess supply [11].