Summary of Wens Foodstuff Group Earnings Call Company Overview - **Company**: Wens Foodstuff Group (300498.SZ) - **Industry**: Agriculture, specifically hog and poultry farming in China Key Financial Highlights - **1H25A Performance**: - Net profit of Rmb3.47 billion, EPS of Rmb0.522 per share, compared to Rmb1.34 billion in 1H24A - Recurring net profit of Rmb3.67 billion, up from Rmb1.28 billion a year ago, but below expectations due to depressed poultry margins [1][2] - No interim dividend declared, same as last year [1] Earnings Estimates Revisions - **2025E**: Recurring earnings estimates revised down by 32% - **2026E**: Revised up by 8% - **2027E**: Revised up by 6% [2] Market Outlook - **Hog Market**: - Expected improvement in supply/demand fundamentals in 2026E due to better industry supply discipline - Anticipated hog price of Rmb16.5/kg in 2026E, up from Rmb14.7/kg in 1H25A [2][18] - **Poultry Market**: - Yellow-feather broiler margin is currently depressed, but improvements expected in 2026E as supply responds to producer feedback [2][33] Cost Management and Profitability - Wens is focusing on cost-cutting measures, including breeding development and optimizing feed formulation, which is expected to support unit profit in hog operations in 2026E [2][33] - Total unit cost for hogs reduced to Rmb12.5/kg in 1H25A, down Rmb1.9/kg year-on-year [20] Revenue Breakdown - **Total Revenue**: Rmb49.88 billion in 1H25A, a 6% increase from Rmb47.09 billion in 1H24A [28] - **Hog Revenue**: Rmb32.74 billion, up 16% year-on-year - **Chicken Revenue**: Rmb15.13 billion, down 9% year-on-year [30] Gross Profit Analysis - **Total Gross Profit**: Rmb6.89 billion, a 32% increase year-on-year - **Hog Gross Profit**: Rmb6.57 billion, up 125% year-on-year - **Chicken Gross Profit**: Rmb74 million, down 96% year-on-year [30] Valuation and Price Target - **Current Price**: Rmb18.19, with a 12-month price target of Rmb19.00, implying a 4.5% upside [1][2] - **P/E Ratio**: Current share price implies an 11x P/E on 2026E, within historical range of 10-20x [2] Risks and Challenges - **Hog Price Uncertainty**: Affected by domestic supply changes and imports [26][34] - **Operational Risks**: Including bio-security measures and disease control [26][34] - **Poultry Pricing Volatility**: Influenced by industry supply/demand dynamics and consumer preferences [26][34] Conclusion - Wens Foodstuff Group is navigating a challenging environment with depressed poultry margins but is expected to benefit from improving hog market conditions and effective cost management strategies. The current valuation reflects a cautious outlook on earnings growth in both the hog and poultry segments [33][37]