Summary of COFCO Jiajia Kang Conference Call Company Overview - **Company**: COFCO Jiajia Kang - **Industry**: Swine Industry Key Points Industry Trends - The swine industry is experiencing a trend of capacity reduction, driven by anti-involution policies, with a potential cyclical turning point expected in the second half of 2026, presenting investment opportunities in the swine sector [2][4] Company Performance - In 2025, COFCO Jiajia Kang demonstrated stable operations, with a year-on-year increase in hog output exceeding 50% from January to November, alongside continuous cost improvements and significant growth in branded fresh products [2][5] - As of November 2025, the company had a cumulative output of 5.465 million hogs, with an average selling price of 13.65 yuan/kg for commercial hogs [2][6] Financial Metrics - The fresh product business achieved cumulative sales of 300,000 tons, with branded revenue accounting for 32.44% of total sales [2][6] - The average cost of production was approximately 13 yuan/kg, with significant regional cost disparities narrowing, and some excellent facilities achieving costs below 11 yuan [2][11][12] Breeding and Production Efficiency - The proportion of high-quality breeding pigs remained stable at over 80%, with production efficiency indicators such as PSY (Pigs Weaned per Sow per Year) reaching close to 29 and MSY (Marketable Pigs per Sow per Year) nearing 27 [2][9] - The company plans to expand its cooperative breeding model, which currently accounts for over 20% of output, while cautiously managing expansion to mitigate disease risks [2][10] Cost Management - The company is implementing cost reduction measures, including optimizing feed formulations and improving production management, with expectations to lower costs by 0.5 to 1 yuan in 2026 [2][14] - The current cost structure shows self-breeding costs around 13 yuan, while cooperative breeding costs are approximately 12 yuan [2][14] Product Development and Market Strategy - The company’s flaxseed pork products saw a cumulative year-on-year growth of 140% from January to November 2025, with plans to maintain a growth rate of at least 50% in 2026 [3][15] - COFCO Jiajia Kang is expanding its fresh product channels by collaborating with major supermarkets and e-commerce platforms, aiming to enhance brand recognition and product diversity [2][16] Future Outlook - The company anticipates entering a favorable profit zone in 2026 due to supply-side capacity reductions and long-term price reversals in the swine market [2][5] - The meat product segment is expected to expand capacity significantly, with a projected total capacity of 52,000 tons by mid-2026 [2][17] Feed Production and Sales - The company has a diversified feed production structure, with pig feed, poultry feed, and ruminant feed each accounting for approximately 30% of total sales [2][18] - Future sales targets aim for steady growth, with new production capacities expected to enhance utilization rates [2][20] Financial Health and Dividend Plans - The company plans to gradually reduce its debt levels over the long term and will consider dividends if profitability remains strong, having already distributed over 1.8 billion yuan since its listing [2][22]

Investment Rating - The report assigns a "Buy" rating to COFCO Joycome (1610.HK) with a target price of HKD 2.4 per share, indicating a potential upside of 29% from the current price of HKD 1.86 [1][6][16]. Core Views - The company has turned a profit in H1 2025, driven by strong performance in pig farming and fresh meat businesses. The revenue for H1 2025 reached HKD 89.63 billion, a year-on-year increase of 19.8%, primarily due to stable production and improved efficiency in the farming sector [3][4][8]. - The report highlights significant growth in various business segments, with pig farming revenue increasing by 116.58% year-on-year, and fresh meat sales rising by 25.1% [4][6][8]. - The company is expected to continue benefiting from cost optimization in pig farming, which will contribute to profit margins, alongside an increase in brand revenue share that is anticipated to enhance profitability in the fresh meat segment [6][16]. Summary by Sections Financial Performance - In H1 2025, the company reported a profit attributable to shareholders of HKD 1.98 billion, recovering from a loss of HKD 3.22 billion in the same period last year. The gross margin before fair value adjustments for biological assets was 8.2%, up 7.2 percentage points year-on-year [4][8]. - The company achieved a pig output of 2.898 million heads, a year-on-year increase of 83.0%, while the average selling price for pigs decreased by 4.5% to HKD 14.59 per kilogram [4][9]. Business Segments - The fresh pork sales volume reached 150,000 tons, up 25.1% year-on-year, with branded boxed pork sales increasing by 46.5% to 27.792 million boxes. The revenue share from branded products in the fresh pork business rose to 31.2%, an increase of 4.5 percentage points from the previous year [6][13]. - The company is focusing on differentiated products, such as flaxseed pork, which has gained recognition in the market, enhancing its brand visibility through strategic channel partnerships [6][13]. Future Outlook - The report forecasts that the company's net profit attributable to shareholders will be HKD 5.02 billion, HKD 7.47 billion, and HKD 9.56 billion for the years 2025 to 2027, respectively [6][16].