Summary of Shennong Development Conference Call Company Overview - **Company**: Shennong Development - **Industry**: White feather broiler chicken industry Key Points and Arguments - **Revenue and Profit Growth**: Despite a challenging environment in the white feather broiler chicken industry, Shennong Development achieved revenue and profit growth through a multi-channel strategy and a full industry chain model. C-end revenue increased by over 30% year-on-year, while offline channel revenue grew by over 40%. The B-end export channel saw a revenue increase of over 100%, reaching 1 billion RMB [2][4]. - **Cost Reduction**: In 2025, the comprehensive breeding cost decreased by over 5 percentage points, with an annual cost of approximately 9,000 RMB. This reduction was primarily due to the full replacement of Shengd 901 Plus, which improved feed conversion ratios and survival rates, along with the application of digital and AI technologies [2][5][6]. - **Market Outlook for 2026**: Although there was a slight decline in white chicken prices at the beginning of 2026, the company maintains a cautiously optimistic outlook for the year. It is expected that there will not be significant price increases overall, but some quarters may see slight surges. The overall supply remains large, but market demand is expected to absorb the supply gap [2][7]. - **Impact of Breeding Supply Disruption**: The impact of breeding supply disruptions on commodity broiler chicks was less than anticipated. Domestic alternatives have gradually mitigated some of the effects, leading to a minimal impact on future industry price trends [2][8]. - **Future Cost Reduction Potential**: Future cost reduction opportunities are expected to come from ongoing research and development of the Shengd 903 variant and improvements in adaptability, as well as enhanced decision-making and operational efficiency through refined management and digitalization [2][9]. - **Revenue Breakdown by Channel**: The revenue is divided into three main segments: B-end, retail channels, and traditional distribution. The B-end, which includes major clients like KFC and McDonald's, accounts for nearly 50% of total revenue. The retail segment represents about 15%, while the distribution segment has decreased to 36% [2][11]. - **Export Market Performance**: Japan remains the primary export market, with Shennong Development achieving the top position in cooked chicken exports to Japan in 2025. The company has also successfully entered the Middle Eastern and Russian markets, with Russia contributing significantly to growth in 2026 [2][12]. - **Profitability and Production Metrics**: The average export price for Shengd 901 Plus remains stable at around 30 RMB, with sales slightly declining to less than 4 million sets. The parent stock performance is strong, resulting in lower costs for commodity broiler chicks [2][10]. - **Future Capital Expenditure**: Capital expenditure is expected to be modest, focusing on the construction of food processing plants in Gansu and Pucheng, with plans for new farm constructions being limited [2][18]. - **Dividend Policy**: The company plans to maintain a high dividend payout ratio, having already distributed 0.3 RMB per share in 2025 and expecting to distribute an additional 0.2 RMB [2][19]. - **Collaboration with Sun Valley**: Shennong Development plans to enhance collaboration with Sun Valley, focusing on cost control and sales synergy, aiming to position Sun Valley as a high-end sub-brand [2][20]. - **Impact of Avian Influenza on Breeding**: The current situation regarding avian influenza in France has made breeding more challenging, which is seen as a potential benefit for the industry, although the exact impact remains uncertain [2][21].

Core Viewpoint - The company is committed to increasing its investment in research and development in the field of metamaterials, aiming to drive continuous innovation and application across various industries [1]. Group 1: Company Development and Achievements - Over 15 years, the company has transformed metamaterial technology from laboratory research to large-scale production, establishing a complete industrial chain [2]. - The company has expanded its production capacity by setting up new research and production bases in Zhuzhou, Tianjin, and Leshan, in addition to existing facilities in Foshan and Luoyang [2]. - The company has achieved full-capacity production at its Foshan and Luoyang bases, with new bases expected to alleviate delivery pressure and enhance production efficiency [2]. Group 2: Core Competitiveness - The company identifies its core competitiveness in three areas: advanced metamaterial technology, significant cost control through digital transformation, and strong order delivery capabilities [3]. - The introduction of the Metamaterials 4.0 technology group is expected to enhance aerospace equipment performance and create new product categories [3]. Group 3: Industrial Ecosystem Construction - The company is focused on building a complete industrial ecosystem for metamaterials, integrating around 2,000 upstream and downstream enterprises to foster innovation and high-quality development [4]. - The industrial layout includes upstream raw material research, midstream key component manufacturing, and downstream end products and services, creating a comprehensive industrial chain [4]. Group 4: Application Expansion - The company is actively expanding the application of metamaterials in various fields, including smart vehicles and robotics, addressing technical challenges and improving performance [7]. - Future developments will focus on integrating sensing and semiconductor technologies, leading to fundamental changes in industrial models [7].