Group 1: Core Insights - The average price of broiler chicks in major production areas in October is 3.35 CNY per chick, down 19.3% year-on-year but up 2.4% month-on-month, indicating a challenging environment for white feather chicken farming [1] - The average price of live chickens is 6.93 CNY per kilogram, down 6.8% year-on-year and 0.9% month-on-month, with a loss of 1.78 CNY per chick in the farming sector [1] - The supply of parent stock broiler chicks is expected to tighten in the second half of 2025 due to a significant decrease in overseas imports, which will also impact the supply of commercial broiler chicks in 2026 [1] Group 2: Yellow Feather Chicken Insights - The average price of fast-growing yellow chickens in October is 4.82 CNY per jin, down 6.4% year-on-year and 10.9% month-on-month, while the average price of Xueshan grass chickens is 7.68 CNY per jin, down 13% year-on-year and 14.2% month-on-month [2] - Despite a slight decline in demand post-holidays, yellow chicken prices remain stable, and profitability in the farming sector is still favorable [2] - Major companies have reduced their yellow chicken production costs, with Wens' cost at approximately 5.8 CNY per jin and Lihua's potentially below 5.7 CNY per jin [2] Group 3: Future Outlook - The demand for quality parent stock broiler chicks is expected to remain strong in 2025, despite an increase in imports of grandparent stock chickens in 2024 [3] - The current low inventory of parent stock chickens and ongoing industry losses are setting the stage for future price increases in yellow chickens [3] - The market for fresh yellow feather chickens is anticipated to have significant growth potential due to changing consumer habits and economic recovery [3]

Investment Rating - The report assigns a rating of "Buy" for the company [4] Core Views - The company is a leading player in the yellow feathered chicken breeding industry, with a market share that continues to rise. The revenue has shown steady growth over the years, with a 10-year CAGR of +15.84% from 2014 to 2024. However, the net profit has experienced significant fluctuations due to the cyclical nature of poultry prices [2][21] - The company has demonstrated significant cost advantages, which help mitigate risks associated with price fluctuations in its products. The complete cost of raising yellow feathered chickens has decreased significantly, providing a buffer against price declines [3][41] - The company has seen a substantial increase in its pig farming business, with plans to reach a pig output of 2 million heads in 2025. The complete cost of pig farming has also decreased, indicating a positive outlook for revenue and profit growth in this segment [7][54] Summary by Sections Company Overview - The company is the second-largest yellow feathered chicken breeding enterprise in China, with a market share exceeding 15%. It has maintained a stable revenue growth trajectory, with total revenue increasing from 4.074 billion to 17.725 billion from 2014 to 2024 [2][21][24] Financial Performance - In the first half of 2025, the company achieved a revenue of 8.353 billion, a year-on-year increase of 7.02%, but the net profit fell by 74.10% to 149 million, primarily due to a decline in yellow feathered chicken prices [1][21] - The company’s revenue from yellow feathered chicken accounted for 81.98% of total revenue in 2024, while the contribution from pig farming has steadily increased from 3.77% in 2019 to 16.51% in 2024 [24] Cost Management - The complete cost of raising yellow feathered chickens has decreased significantly, with the cost dropping to below 11 yuan per kilogram in the first half of 2025. This reduction is attributed to lower feed prices and improved management practices [3][41] - The complete cost of pig farming has also seen a decline, reaching 12.3 yuan per kilogram by June 2025, with expectations to further decrease to 12 yuan by the end of the year [7][54] Market Outlook - The yellow feathered chicken prices have shown signs of recovery since late July 2025, which is expected to improve profits in the third quarter. The company anticipates that the market conditions will favor further growth in both chicken and pig farming segments [8][38] - The company projects revenues of 17.924 billion, 21.016 billion, and 23.589 billion for 2025, 2026, and 2027 respectively, with net profits expected to reach 837 million, 1.829 billion, and 2.338 billion in the same years [8][59]