China Galaxy Securities: Focus of 26 years of agricultural investment revolves around pig breeding and pet sectors, emphasizing tracking core indicators and timely decision-making points.

China Galaxy Securities released a research report stating that the focus of the agriculture industry in 2026 is to wait for and capture the industry turning point, track the core indicators of fundamental factors, and find entry points in a relatively reasonable valuation range. Specifically, the livestock sector continues to emphasize both offense and defense, but unlike the emphasis on defense in 2025, 2026 emphasizes grasping future potential elasticity; the pet sector has experienced a valuation regression and is waiting for recovery in performance growth, investment opportunities will come again. The bank believes that the investment opportunities in the agriculture industry in 2026 can mainly focus on pig farming and the pet sector, emphasizing timely tracking of core indicators and timing of selection. The main points of China Galaxy Securities are as follows: (1) Pig farming: Waiting for supply and demand adjustments, the logic of offense and defense continues As a traditional industry, opportunities in the pig farming sector come from the expected changes in pig prices brought about by changes in production capacity. The bank has consistently recommended a logic of offense and defense in the pig cycle since the annual strategy report of 2025, relying on low valuations, low stock prices, and emphasizing cost-effectiveness. With the gradual promotion of policies to reduce production capacity in 2025, the gradual manifestation of the catalytic effect against internal competition, and the capacity reduction caused by potential industry losses, there may be changes in future pig price expectations. Although current expectations for pig prices are still relatively pessimistic based on existing data, there is a possibility of internal changes in the industry, meaning that price expectations may change, presenting investment opportunities. Key recommendations include "big pig companies" Muyuan Foods, Wens Foodstuff Group, "medium and small pig companies" Tecon Biology Co.Ltd, Yunnan Shennong Agricultural Industry Group, with active attention to DEKON AGR and companies in the sector. (2) Pet food: Export growth as a shield, development of own brands as a spear As a new consumer industry, the pet sector's basic logic comes from the continued growth of the industry and significant room for increased market share. At the current point in time, the basic logic of pet food companies relies on the performance support brought about by the continued growth of the export business, and the valuation logic relies on the maintenance/surpassing of the growth of their own brands and the ability to replicate multi-brand operations. Therefore, for the pet food industry, which is still in a high investment stage, export growth is the shield for maintaining impressive performance, and the vigorous development of own brands is the spear - the necessary path to significantly increase market share in the future. After experiencing a partial regression in valuation, it is recommended to focus on Yantai China Pet Foods, Gambol Pet Group, Petpal Pet Nutrition Technology, and actively monitor Wenzhou Yuanfei Pet Toy Products, among others. Risk warnings: Risks of animal prices not meeting expectations, risks of animal diseases, risks of fluctuating raw material prices, risks of policies, risks of natural disasters, etc.