Guolian Minsheng Securities: Pig farming enters a period of continuous profitability, focus on investment opportunities in cyclical and prosperous industries.

Guolian Minsheng Securities released a research report, stating that according to data from the Ministry of Agriculture and Rural Affairs, the number of piglets born in China from the second half of 2024 to June 2025 continues to increase, indicating that the supply of pigs in the second half of 2025 is expected to remain abundant. The securities firm predicts that pig prices will fluctuate at relatively low levels in stages. The third quarter is expected to see an increase in the stock of pigs and aquatic products, with demand recovery expected to drive expansion in the pig feed and aquatic feed markets. In addition, there is a vast market space for feed overseas, and domestic feed companies are actively seeking opportunities to expand internationally, which is promising for future development. The domestic pet industry may still have strong growth momentum, with domestic products replacing imports and continually upgrading, with a focus on pet food and health companies with great development potential domestically. The main points of view of Guolian Minsheng Securities are as follows: Livestock: In the first half of 2025, the industry is slightly profitable, with revenue and profits of listed pig companies doubling In the first half of 2025, pig farming companies (selecting 15 listed companies) achieved revenue of 235.068 billion RMB, a year-on-year increase of 16.46%; achieving a net profit attributable to the owners of the parent company of 16.848 billion RMB, a year-on-year increase of 1315%. Due to the impact of declining breeding costs, as of July, pig farming has maintained profitability for 15 consecutive months since May of last year, but the profit margin has gradually narrowed since the fourth quarter of 2024. In terms of quarters, in the second quarter of 2025, pig companies achieved a net profit attributable to the owners of the parent company of 8.832 billion RMB, an increase of 10.16% quarter-on-quarter and 21.73% year-on-year; Muyuan Foods and Wens Foodstuff Group were at the forefront of net profits, with 6.039 billion RMB and 1.473 billion RMB respectively. Pets: Overseas business has intermittent fluctuations, while domestic business continues to improve In the first half of 2025, pet food companies (selecting Gambol Pet Group, Yantai China Pet Foods, Petpal Pet Nutrition Technology) had a total revenue of 9.6 billion RMB, a year-on-year increase of 22%. Looking at individual companies, Gambol Pet Group's revenue in the first half of 2025 increased by 33% year-on-year, Yantai China Pet Foods increased by 24% year-on-year, and Petpal Pet Nutrition Technology decreased by 14% year-on-year. Overall, pet food companies experienced some fluctuations in their overseas business due to tariff policies, while their domestic independent brand business showed strong performance. In the second quarter of 2025, total revenue of pet food companies reached 3.5 billion RMB, an increase of 21% year-on-year. Feed: Industry turning point evident, performance of feed companies in the first half of 2025 improving In the first half of 2025, feed companies (selecting Guangdong Haid Group, Guangdong Yuehai Feeds Group, Wellhope Foods, Shandong Teamgene Technology) had a total revenue of 813 billion RMB, a year-on-year increase of 15%. Looking at individual companies, Shandong Teamgene Technology saw a 167% year-on-year increase in revenue in the first half of 2025. Guangdong Haid Group, Guangdong Yuehai Feeds Group, and Wellhope Foods maintained relatively steady revenue growth. In the second quarter of 2025, total revenue of feed companies reached 460 billion RMB, an increase of 18% year-on-year. The net profit attributable to the owners of the parent companies of feed companies in the first half of 2025 all showed improvement. The total net profit attributable to the owners of the main feed companies in the first half of 2025 was 2.94 billion RMB, a year-on-year increase of 42%. Risk warning: Risks of animal diseases, long-term low prices of livestock and poultry, fluctuations in raw material prices, exchange rate fluctuations.