Core Viewpoint - TianKang Biological reported a steady increase in revenue despite a decline in net profit, indicating resilience in a challenging market environment [1][4]. Financial Performance - For the first three quarters, the company achieved operating revenue of 13.61 billion yuan, a year-on-year increase of 4%, while net profit attributable to shareholders was 412 million yuan, down 27.2% [1]. - In Q3 alone, the operating revenue was 4.764 billion yuan, reflecting a quarter-on-quarter growth of 2.08%, marking three consecutive quarters of revenue growth [1]. Business Development - The company has developed multiple business lines, enhancing its competitive edge through cost advantages and efficient resource utilization [3]. - The protein oil business achieved record highs in raw material procurement, revenue, and profit for the 2024-2025 season, with raw material procurement reaching 950,000 tons and revenue of 2.5 billion yuan, exceeding targets by 136% and 137% respectively [3]. Feed Business - In the first nine months of 2025, the feed business sold 2.12 million tons, a year-on-year increase of 3.62%, with Q3 sales reaching 776,000 tons, up 11.8% year-on-year [3]. - The sales of pig feed in Q3 were 462,300 tons, showing an 18% increase year-on-year, while poultry feed sales were 165,500 tons, up 8% [3]. Cash Flow and Financial Health - The operating cash flow for the first three quarters was 2.351 billion yuan, a year-on-year increase of over 9%, indicating strong sales collection capabilities [4]. - The company's net assets increased to 7.17 billion yuan, a growth of 2.21%, and short-term borrowings decreased significantly by 31.2% to 2.225 billion yuan, improving the financial structure [4]. Market Conditions - The average market price for pigs was reported at 10.9 yuan/kg as of October 20, the lowest since 2022, which may lead to industry capacity reduction [4]. - The comprehensive cost of pig farming in Q3 was 12.78 yuan/kg, down from 13 yuan/kg in the first half of the year, indicating potential for further cost reductions [5]. Strategic Acquisitions - The company plans to acquire 51% of Qiangdu Livestock, a profitable breeding enterprise, which is expected to enhance cost optimization and operational efficiency [5].

Investment Rating - The investment rating for the company is "Buy" (maintained) [1] Core Views - The company has shown steady operations in pig farming, with a recovery in profitability for its protein and oil businesses. The revenue for the first half of 2025 reached 8.847 billion yuan, a year-on-year increase of 10.68%, while the net profit attributable to shareholders was 338 million yuan, up 22.27% year-on-year. However, the net profit for Q2 2025 was 190 million yuan, reflecting a year-on-year decrease of 14.59% [3][4] - Due to the impact of pig price fluctuations, the profit forecasts for 2025-2027 have been revised downwards. The expected net profits for 2025, 2026, and 2027 are 677 million yuan, 913 million yuan, and 1.576 billion yuan, respectively, with corresponding EPS of 0.50 yuan, 0.67 yuan, and 1.15 yuan [3][4] Summary by Sections Pig Farming Business - The revenue from the pig farming business in H1 2025 was 2.849 billion yuan, a slight decrease of 0.95% year-on-year, with a gross margin of 11.78%, an increase of 1.55 percentage points year-on-year. The number of pigs sold was 1.5282 million heads, representing a year-on-year increase of 9.05%. The company aims to reduce the total cost to below 13 yuan per kilogram for the entire year [4] Feed Business - The feed business reported revenue of 2.434 billion yuan in H1 2025, down 14.24% year-on-year, with a gross profit of 246 million yuan, a decrease of 35.17% year-on-year. The sales volume was 1.3415 million tons, a slight decline of 0.58% year-on-year. Despite the drop in sales volume, the overall gross margin improved year-on-year [5] Corn Storage and Protein Oil Processing - The corn storage business generated revenue of 1.305 billion yuan in H1 2025, a significant increase of 72.32% year-on-year, with a gross margin of 3.51%, up 7.76 percentage points year-on-year. The protein oil processing business saw revenue of 1.449 billion yuan, a remarkable increase of 97.60% year-on-year, with a gross margin of 6.99%, up 5.35 percentage points year-on-year. These segments have contributed to the overall profit recovery [5]