Summary of the Conference Call for Lusi Co., Ltd. Company Overview - Lusi Co., Ltd. specializes in pet snacks, pet staple food, and single feed, with a focus on dog and cat food products. The main products include pet snacks such as jerky, canned food, biscuits, and dental bones [doc id='4'][doc id='8']. Financial Performance - In 2024, Lusi achieved revenue of 778 million yuan, a year-on-year increase of 11.7%. Pet snacks contributed 550 million yuan (71.3% of total revenue), jerky products accounted for 480 million yuan (61%), and staple food revenue was 102 million yuan, up 53.4% [doc id='2'][doc id='8']. - The net profit for 2024 was 78 million yuan, a 14.6% increase, driven by higher sales of jerky, staple food, and canned products, along with improved gross margins [doc id='10']. - In Q1 2025, revenue reached 184 million yuan, up 17.6%, with net profit of 16.51 million yuan, a 17.3% increase. Export business grew by 33%, while domestic pet food business increased by 14.7% after excluding the impact of meat powder [doc id='11']. Sales and Market Dynamics - Export sales in 2024 were approximately 480 million yuan, a 16.6% increase, accounting for 60% of total revenue. Domestic sales were 295 million yuan, up 4.4%, making up 40% of total revenue [doc id='9']. - The domestic business is shifting focus towards pet food, expanding from the original brand "Lusi" to include "Miaoguan," with a strong emphasis on staple food due to its large market size and acceptance [doc id='12']. Brand Strategy and Product Development - The new brand Miaoguan targets lower-tier markets, while Lusi plans to enhance its brand through the development of high-value-added products to improve gross margins [doc id='15']. - The sales ratio of staple food and snacks under the Lusi brand is shifting, with future marketing efforts focusing more on staple food [doc id='16']. Online and Offline Sales Channels - Online direct sales account for about 40% of domestic revenue, with online distribution at around 20%, and offline channels contributing over 30% [doc id='19']. - The Tmall platform has a gross margin of about 20%, with a net profit margin of 4%. However, platforms like Douyin and Kuaishou are currently not profitable [doc id='17'][doc id='18']. Production and Capacity - Lusi has production bases in Shandong, Gansu, and Sihanoukville, Cambodia, with a total of 8 production workshops and 2 R&D centers. Current snack production capacity is approximately 15,000 to 16,000 tons, staple food capacity is 30,000 tons, and meat powder capacity is 20,000 tons [doc id='6']. - The first phase of the Cambodian project has a capacity of 3,000 tons for jerky snacks, with a second phase expected to add 7,000 tons, contingent on U.S. tariff negotiations [doc id='22']. Industry Trends and Consumer Behavior - The pet food industry is witnessing a trend towards domestic brand acceptance, especially as U.S. brands face high tariffs due to trade tensions. Domestic brands are increasingly favored, with a growing market share [doc id='26']. - There is a notable increase in pet ownership, particularly among families with multiple pets, leading to an overall rise in single purchase amounts despite some decline in spending per pet [doc id='28'][doc id='29']. Future Outlook - Lusi aims for a growth target of 17% to 18% in Q1, with plans to enhance marketing efforts and product differentiation to boost domestic sales, which have not met expectations [doc id='31']. - The company is also focusing on expanding its presence in the U.S. and Southeast Asian markets through its Cambodian operations, while maintaining stability in the European market [doc id='32'].

Industry Overview - The pet economy has become a hot topic, with significant growth in the pet sector, particularly in pet food, which is expected to continue expanding [1][2] - The pet consumption market is projected to exceed 404.2 billion yuan by 2027, with a compound annual growth rate (CAGR) of 12.6% from 2015 to 2027 [1] - The number of pet dogs and cats in China is expected to reach 124 million by 2024, with a 2.1% increase from 2023 [2] Company Performance - Leading companies like Guai Bao Pet and Zhong Chong Co. have shown remarkable revenue growth, with Guai Bao's revenue increasing from 1.4 billion yuan in 2019 to 3.4 billion yuan in 2022, a CAGR of 34.3% [3] - Zhong Chong Co. reported revenues of 3.248 billion yuan in 2022, with a projected increase to 4.465 billion yuan by 2024, reflecting growth rates of 12.72% and 19.16% respectively [5][6] Market Dynamics - The pet food sector accounts for over 60% of the urban pet consumption market, which is expected to reach 3.012 billion yuan in 2024 [2] - The market is experiencing a "Matthew Effect," where larger companies are gaining market share while smaller firms are struggling, with over 100,000 pet companies disappearing recently [1][10] Competitive Landscape - The top pet food brands are seeing shifts in market share, with Mai Fu Di surpassing Royal Canin in 2022 [4][6] - The CR10 (concentration ratio of the top 10 brands) for the pet food market is 19.96%, indicating a slight increase from the previous year [6] Challenges for Small Enterprises - Many small pet companies are facing significant challenges, with at least 35 companies expected to go bankrupt in 2024 due to financial difficulties [9][10] - The industry is witnessing a trend where brands that fail to innovate or adapt to market changes are being eliminated [10] Future Trends - The aging population is driving pet ownership, with consumers over 50 years old showing a 27% annual increase in spending [3] - New brands are emerging with unique selling propositions, focusing on fresh ingredients and innovative product offerings [11]

Investment Rating - The investment rating for the agriculture, forestry, animal husbandry, and fishery industry is "Positive" (maintained) [1] Core Viewpoints - The report highlights that the pig price is expected to remain weak in the short term, with an overall supply surplus anticipated for the year, leading to a bearish outlook on prices [2][15] - The report suggests a shift from "cyclical thinking" to focusing on "quality and price" in investment strategies, emphasizing the importance of operational efficiency among different companies [4][16] - The outbreak of avian influenza in Brazil is expected to impact chicken prices positively in the domestic market, while the industry is seeing a concentration of profit margins towards upstream sources [5][17] Summary by Sections 1. Pig Industry - The latest pig price is reported at 14.58 CNY/kg, with an average weight of 129.71 kg for market pigs. The price for 15 kg piglets is 630 CNY/head, and the price difference for 175 kg market pigs has decreased to 0.36 CNY/kg [3][15] - The number of breeding sows in March was 40.39 million, a year-on-year increase of 1.2% and a decrease of 0.96% from the end of 2024, indicating a stable production capacity [3][15] - The report recommends focusing on leading companies in the pig farming sector, such as Muyuan Foods and Wens Foodstuffs, due to their strong profit certainty in 2025 [4][16] 2. Poultry Industry - The outbreak of avian influenza in Brazil may lead to trade bans, which could support a rebound in domestic chicken prices. The current price for broiler chickens is 7.4 CNY/kg, with a slight decrease from the previous month [5][17] - The report identifies two main investment lines: high-return quality imported breeding stock and comprehensive industry leaders like San Nong Development [5][17] 3. Feed Industry - The report recommends Haida Group due to its cash flow turning point and high overseas growth potential. The fish prices have increased, while feed prices have decreased, indicating a recovery in aquaculture profitability [6][19] - The report notes that the capital expansion phase has ended, and leading companies are entering a new phase of stable cash flow [7][19] 4. Pet Industry - In April 2025, the sales figures for pet food showed a decline, with cat and dog food sales at 810 million CNY and 380 million CNY, respectively, reflecting year-on-year decreases of 4.7% and 6.2% [9][20] - The report highlights the strong performance of domestic brands like Mai Fudi and the growth of companies like Zhongchong, which are gaining market share [10][24] 5. Agricultural Products - The report indicates that domestic agricultural products are less affected by tariffs, with a potential upward trend in prices due to reduced imports. The forecast for corn imports has been adjusted down to 7 million tons for the 2024/2025 period [11][26] - The report emphasizes the importance of agricultural stocks as a defensive asset class, suggesting that the sector is currently undervalued [11][26] 6. Market and Price Situation - The Shanghai and Shenzhen 300 Index closed at 3889 points, up 1.12% from the previous week, while the agriculture index rose slightly by 0.05% to 2621 points [27][29] - The report notes that the pet food sector performed the best among sub-sectors, with a significant increase of 10.93% [27][29]

Summary of Pet Food Industry Conference Call Industry Overview - The pet food industry is experiencing rapid growth and brand upgrades, with leading brands showing significant growth rates. For instance, a prominent brand reported a year-on-year growth of 70% [1][2]. - The emergence of new pet brands has significantly decreased, leading to increased operational difficulties and financial pressures for smaller brands, resulting in a rapid increase in market share for leading brands [3][6]. Key Insights - **Sales Performance**: - Major brands like 麦富迪 (Mai Fu Di) and 弗列加特 (Fleegat) reported year-on-year growth rates of 30% and 106% respectively, while 京东 (JD.com) saw a decline of 7.3% in sales [2][3]. - The overall performance of JD.com in the first four months of 2025 was below expectations, despite leading brands maintaining good growth [2]. - **Product Trends**: - High-end baked pet food is increasingly replacing traditional puffed food, with prices for baked food significantly higher (e.g., Fleegat baked food at approximately 89 RMB/kg compared to puffed food at around 74 RMB/kg) [1][2][4]. - Companies are diversifying their product lines to include specialized food for different life stages and breeds, which raises the bar for supply chain and R&D capabilities [1][4]. - **Brand Strategy Changes**: - There is a notable shift in brand operations towards emphasizing supply chain safety and food safety traceability. Companies are collaborating with media outlets and launching new product lines to enhance consumer awareness [5]. - The focus on complete supply chains and traceable raw materials is becoming essential for ensuring product safety, with companies either investing in their own supply chains or partnering with established manufacturers [5]. Market Dynamics - **Competitive Landscape**: - The market is witnessing a rapid reshuffling, with leading brands gaining market share at the expense of smaller, less established brands [3][6]. - The overall production capacity in the upstream sector is relatively surplus, but leading companies are still receiving good order volumes, while smaller firms face challenges [7]. Future Outlook - The pet food market is projected to have high growth potential, with companies like 乖宝 (Guai Bao) showing significant sales growth from several billion to 35 billion RMB, and net profit margins increasing from 3-4% to around 12% [3][8]. - The trend of young consumers favoring online shopping and product upgrades is expected to continue, with no signs of a consumption downgrade [8]. - The potential for a company to reach a market capitalization of 100 billion RMB is anticipated, indicating a strong long-term growth trajectory for the industry [8]. Cost and Profitability - Raw material costs are currently low, allowing companies with supply chain advantages to absorb these costs and improve gross margins. For example, Guai Bao's sales growth and profit margin improvements reflect the benefits of product upgrades targeting young consumers [9].

Investment Rating - The industry is rated as "Buy" [5] Core Views - The report indicates a weakening trend in pig prices, with the national average price for external three yuan pigs at 14.61 yuan/kg, down 1.42% week-on-week. The average price for 15 kg piglets is 36.23 yuan/kg, down 1.74% week-on-week. The report suggests that the industry is approaching a turning point in inventory levels as the market conditions evolve [1][24] - The white feather broiler and chick prices have also declined, with the white feather broiler price at 7.40 yuan/kg, down 0.67% week-on-week, and chick price at 2.85 yuan/bird, down 2.06% week-on-week. The report highlights a decrease in procurement willingness due to increased inventory and slow sales of frozen products [1][33] Summary by Sections 1. Industry Performance - The agricultural and forestry sector underperformed the market, with the agricultural index rising only 0.05% compared to the Shanghai Composite Index's 0.76% increase [14] - The performance of sub-sectors varied, with animal health and feed sectors showing positive growth, while poultry farming and planting sectors experienced declines [14][18] 2. Key Data Tracking - The average weight of pigs at slaughter is at a new high since early 2023, indicating potential inventory reduction in the near future [24] - The average price of corn is 2374.90 yuan/ton, up 0.48% week-on-week, while soybean meal prices have decreased by 5.93% to 3115.71 yuan/ton [2][47] 3. Investment Recommendations - The report recommends focusing on the pig farming sector, suggesting that the industry is nearing a turning point in inventory levels, which could lead to a long-term profit increase. Key companies to watch include Muyuan Foods, Wens Foodstuff Group, and Juxing Agriculture [4][73] - For the post-cycle sector, companies like Haida Group and Ruipu Biological are recommended due to the recovery in feed and veterinary demand [4][73] - In the planting chain, companies such as Suqian Agricultural Development and Beidahuang are highlighted as having strong investment opportunities due to the upward trend in grain prices [4][73] - The pet food sector is also noted for its growth potential, with companies like Guibao Pet and Zhongchong Co. being recommended [4][73]

Investment Rating - The industry is rated as "Buy" [5] Core Viewpoints - The report indicates a weakening trend in pig prices, with the national average price for external three yuan pigs at 14.61 yuan/kg, down 1.42% week-on-week. The average price for 15 kg piglets is 36.23 yuan/kg, down 1.74% week-on-week [24][1] - The report highlights that the industry is approaching a turning point in inventory levels, with the average post-slaughter weight of pigs reaching a new high since early 2023, suggesting a potential recovery in profitability after inventory reduction [4][24] - In the poultry sector, both white feather broiler and chick prices have declined, with white feather broiler prices at 7.40 yuan/kg, down 0.67% week-on-week, and chick prices at 2.85 yuan/bird, down 2.06% week-on-week [33][2] Summary by Sections 1. Market Review - The agricultural sector underperformed the market, with the agricultural index rising only 0.05% compared to the Shanghai Composite Index's 0.76% increase [14] - The performance of sub-sectors within agriculture varied, with animal health and feed sectors showing positive growth while poultry and planting sectors faced declines [14][18] 2. Key Data Tracking - The average price of corn is 2374.90 yuan/ton, up 0.48% week-on-week, while soybean meal prices fell by 5.93% to 3115.71 yuan/ton. Wheat prices increased by 0.33% to 2468.89 yuan/ton [2][47] - The report notes that the average weight of pigs at slaughter is 92.02 kg, with a slight increase of 0.17% week-on-week, indicating stable supply conditions [22][24] 3. Investment Recommendations - For the pig farming sector, the report recommends stocks such as Muyuan Foods, Wens Foodstuff Group, and Juxing Agriculture, anticipating a long-term upward trend in profitability following inventory reduction [4][73] - In the planting chain, the report suggests focusing on companies like Suqian Agricultural Development and Beidahuang, as the upward trend in grain prices is expected to continue [4][73] - The pet food sector is highlighted as a growth area, with recommendations for companies like Guibao Pet and Zhongchong Co., as the domestic market continues to expand [4][73]

Investment Rating - The investment rating for the light industry manufacturing sector is "Positive" [2] Core Insights - Overall consumer demand remains weak, but there are opportunities in specific segments where product and channel transformations can enhance market share, and brand recognition or performance recovery is expected [2][8] - The pet food sector shows high potential with strong consumer education barriers, brand loyalty, and significant single product effects [2][8] - The baby care market is fragmented, with leading brands rapidly increasing market share through cost-effectiveness and popular products, heavily relying on online sales [2][8] - Domestic second-tier brands in sanitary napkins and toothpaste are gaining market share, utilizing platforms like Douyin for traffic generation and empowering other platforms and offline markets [2][8] - The trend of innovative products and brand rejuvenation in the trendy toy sector is accelerating, with companies like Pop Mart and Blokus experiencing rapid revenue growth [2][8] Summary by Sections 1) Product & Channel Transformation - Baiya Co. reported a significant revenue increase of 39% in Q4 2024 and 30% in Q1 2025, with a strong performance in e-commerce and a positive outlook for its probiotic series [3][9] - Dengkang Oral Care also showed robust growth, with a 39% increase in Q4 2024 and 19% in Q1 2025, benefiting from an optimized product structure and strong online sales [3][9] - Runben Co. experienced a 34% revenue increase in Q4 2024 and 44% in Q1 2025, driven by the rapid launch of new products [4][9] - The trendy toy sector, represented by companies like Blokus and Pop Mart, saw revenue growth of 156% and 278% respectively, indicating a strong market presence [4][9] 2) High Competitive Barriers - Guibao Pet's revenue and profit exceeded expectations, driven by strong growth in its proprietary brand and successful high-end product launches [10] - The overall industry remains buoyant, with companies optimizing product and channel structures, leading to sustained revenue growth and improved profitability [10] 3) Performance Recovery Expected - Chenguang Co. reported lower-than-expected performance due to a weak consumer environment, but recovery is anticipated if market conditions improve [10] - The company is focusing on enhancing its IP product strategy, which is expected to contribute to new growth points [10]

Summary of Conference Call Records Industry or Company Involved - Convertible Bond Market - Semiconductor Industry - AI and Robotics Sector - Consumer Goods Sector (including cosmetics and food) - Pet Food Industry - Low-Temperature Dairy Products Industry Core Points and Arguments Convertible Bond Market - The average price of convertible bonds has risen to 119.39 yuan, with an average rating close to 90 and a conversion premium of 41.29%, indicating a high price range but not overly expensive in valuation terms [1][3] - Structural opportunities exist in the market, particularly for high-quality issuers or those with significant stock elasticity, as concerns over credit rating adjustments have been alleviated in low-price ranges [1][4] Impact of Tariff Easing - The easing of tariffs has not significantly improved market sentiment, as 91% of tariffs were canceled and 24% suspended, leading to a quick absorption of short-term benefits [2] - Export-oriented companies may experience profit impacts due to high tariff costs, while domestic demand sectors and technology growth areas like AI and robotics are less affected [7] Performance of Various Sectors - In Q1 2025, the consumer and growth sectors showed leading net profit growth, with agriculture, forestry, and fishery sectors experiencing a staggering 789% year-on-year growth [8] - The TMT (Technology, Media, and Telecommunications) sector also achieved double-digit growth, while midstream manufacturing industries turned from negative to positive growth [8] Recommendations for Investment - Focus on companies benefiting from technological growth and domestic demand expansion, such as those in AI, semiconductors, and consumer goods [5] - Specific convertible bond recommendations include companies like Dinglong, Anji Technology, and Keda Li, which are positioned well in the semiconductor and AI sectors [9][11] Company-Specific Highlights - **Haopeng Company**: Benefiting from domestic battery replacement, with a 23% increase in revenue and a 900% increase in net profit in Q1 2025 [3][13] - **Kedali Company**: Engaged in humanoid robotics, with a 20% revenue increase and a 25% net profit increase in Q1 2025 [14] - **Polaire**: A leading domestic cosmetics brand, with an 8% revenue increase and a 28% net profit increase in Q1 2025, showcasing strong brand building capabilities [15][16] - **China CRRC**: In the pet food sector, showing strong domestic sales growth despite tariff impacts, with a 30% increase in sales through online channels [17] - **New Dairy Industry**: Leading in low-temperature dairy products, with a 48% increase in net profit in Q1 2025, driven by product optimization and cost control [18] Other Important but Possibly Overlooked Content - The overall market reaction to tariff benefits has been muted, as current tariff levels remain higher than at the end of the previous year, indicating ongoing uncertainty in trade relations [6] - The long-term trend towards self-sufficiency in technology, particularly in semiconductor and AI sectors, is emphasized as a key market direction [7]

Group 1: Livestock and Pet Food Industry - The livestock sector is experiencing a supply contraction due to capacity reduction, leading to improved profitability for leading companies like Muyuan Foods, which benefit from scale and efficiency during the new pig cycle [1] - The white feather chicken market faced weak supply and demand, but companies like Shennong Development achieved significant profit reversals in Q1 2025 due to falling feed prices and improved farming efficiency [1] - The core driver of profitability in the livestock sector is the substantial improvement in unit costs, making chicken companies with cost control and channel advantages more attractive for investment [1] - The pet food sector is expected to see both revenue and profit growth in 2024, with profits increasing by 77.8%, driven by lower raw material prices, rapid growth in proprietary brand sales, and steady growth in overseas OEM business [1] - In Q1 2025, the pet food sector remains highly prosperous, but there is significant differentiation among companies; brands like Zhongchong and Guibao are experiencing rapid profit growth, while Petty Holdings faces profit declines due to tariff policy changes and initial investments in new capacity [1] - The seed industry is under pressure, with profits expected to decline by over 50% year-on-year in 2024, and continuing to face challenges in Q1 2025 with an 82.4% year-on-year profit drop [1] - The animal health industry is facing intense competition but is expected to see a rebound in vaccine sales and core product profits starting in Q1 2025, with a projected year-on-year profit increase of 28% [1] - Investment focus should be on leading vaccine companies with stable customer bases and comprehensive product lines, as they are likely to benefit first from downstream recovery and achieve profit restoration [1] Group 2: Medical Aesthetics and Regulatory Environment - The competition in the medical aesthetics sector is intensifying as companies rush to apply for Class III medical device certifications, with certified products expected to become the primary procurement source for downstream institutions [3] - Companies that have obtained Class III certifications and possess industrialization capabilities, such as Haohai Biological and Huaxi Biological, are recommended for their technological barriers and channel synergy advantages, which may lead to rapid profit release during the initial product rollout [3] Group 3: Corporate Restructuring and Market Strategy - Runtian Industrial's plan to "shell" ST United is seen as a strategic move to navigate the current strict IPO review environment, leveraging its profitable consumer assets to enhance the quality and sustainability of the listed company [3] - ST United has been facing continuous losses and cash flow deterioration, with a projected net loss of 63.7 million yuan in 2024, and is under pressure from potential delisting due to ongoing losses and information disclosure violations [3] - Investors are advised to pay close attention to the specific terms of the transaction, including pricing, valuation levels, and profit guarantees, to avoid potential overvaluation or capital manipulation [3] Group 4: Pharmaceutical Innovation and Market Impact - China Antibody Pharmaceutical's recent placement of new shares at an 11% discount aims to raise 124 million HKD, primarily for the development and international collaboration of its innovative drug SM17, indicating the company's strong focus on this project's clinical advancement and commercial potential [4] - SM17 is a first-in-class drug targeting the IL-25 receptor for treating atopic dermatitis, positioned in a rapidly growing market with significant potential for success [4] - The global market for atopic dermatitis patients exceeds 230 million, with over 70 million in China, and if successful, SM17 could rank among the top treatments in this category [4] - Recent acquisitions by major pharmaceutical companies in the early-stage AD candidate market suggest that SM17 could attract interest for cross-border licensing or acquisition if it demonstrates strong data in Phase II trials [4] - The funding allocation for SM17's clinical advancement and international collaboration is set at 45%, with additional funds aimed at expanding the product pipeline and ensuring operational safety [4] Group 5: Impact of U.S. Drug Pricing Policies on Chinese Pharmaceutical Companies - The U.S. administration's recent executive order aims to tie drug prices to the lowest prices in other developed countries, which may indirectly affect Chinese biopharmaceutical companies by creating opportunities for them to enter international markets [5] - While U.S. innovative drug companies may face long-term gross margin pressures due to this pricing policy, Chinese companies with cost advantages could benefit from increased market access [5]

Core Viewpoint - Three Squirrels has re-entered the pet food market with the launch of its new pet brand "Gold Medal Dad," offering a range of products including cat and dog food, snacks, and supplies, indicating a strategic pivot towards the growing pet economy in China [2][3][5] Company Summary - Three Squirrels previously ventured into the pet food sector in 2017 and established a wholly-owned subsidiary, Anhui Raised a Hairy Child Pet Food Co., Ltd., in 2020, creating its own brand "Raised a Hairy Child" [3] - In 2022, the company transferred the brand trademark to Shanghai Qixiang Enterprise Consulting Co., Ltd., which was seen as a strategic retreat from the pet food market due to business considerations [5] - In January 2023, Three Squirrels announced the establishment of Anhui Three Squirrels Pet Food Co., Ltd. to incubate the new brand "Gold Medal Dad," demonstrating renewed confidence in the pet economy [5][7] Product Launch and Market Position - The "Gold Medal Dad" brand has launched various products, including freeze-dried dog food and cat food, with a notable price point of 58.125 yuan/kg for its baked cat food, achieving over 6,000 sales [7] - The brand's Tmall flagship store has attracted nearly 14,000 followers, indicating a positive reception in the market [7] Industry Context - The pet economy in China is experiencing significant growth, with the market expected to exceed 300 billion yuan by 2024, driven by a 7.5% increase in urban pet consumption [9][10] - Major pet companies have reported record-breaking performances, with Petty Co. achieving its highest net profit in nearly a decade and other companies like Zhongchong Co. and Guibao Pet reaching historic revenue milestones [9] - Over 30 leading companies from various sectors, including food and beverage, pharmaceuticals, and retail, are entering the pet market, reflecting a broader trend of diversification into the pet economy [10] Competitive Landscape - The domestic pet industry is still in its developmental phase compared to international markets, with many companies relying on overseas operations for initial revenue [12] - The competitive landscape is intensifying, with both new and established brands vying for market share, necessitating innovation and differentiation strategies to succeed [13] - The pet food and supplies sector is characterized by a mix of foreign brand dominance and local enterprise participation, leading to a diverse and competitive market environment [13]