GF SEC: The trend of industrial scale pig farming in Vietnam is on the rise, domestic companies are paying close attention to market opportunities.

GF SEC released a research report stating that as a populous country, Vietnam's pork consumption market continues to expand driven by the increase in terminal consumer demand. Currently, Vietnam's livestock industry has a large potential for scale and professionalization improvement. However, factors such as African swine fever outbreaks and policy changes are pressuring small and medium-sized farms to accelerate their exit, allowing large-scale livestock companies in Vietnam to benefit from industry development. In addition, Vietnam's long-term policy support for foreign investment, coupled with domestic pig farming companies' advantages in epidemic prevention experience and breeding technology reserves, offers the opportunity to tap into overseas growth by entering the Vietnamese pig farming market. It is recommended to pay attention to the expansion plans of domestic pig farming companies overseas, with a focus on Muyuan Foods (002714.SZ). Key points highlighted by GF SEC: - Continuous growth in pork consumption in Vietnam, with a leading position in pig farming - Vietnam's population exceeds 100 million, and protein consumption levels are increasing due to economic growth. Currently, Vietnam ranks among the top in terms of pork consumption and production, with pork consumption per capita second only to China. According to USDA data, Vietnam's pork consumption in 2024 is projected to reach 3.88 million tons, ranking fourth globally, with per capita consumption levels significantly higher than the global average. Vietnam's per capita pork consumption in 2024 is estimated at 38.3 kg/year, second only to China. In terms of pork production, Vietnam ranks sixth globally in pig farming. According to USDA data, by 2023, Vietnam had a pig inventory of 25.546 million heads, making it the sixth-largest pig farming nation in the world, surpassing only by China in the Asian region. - African swine fever impacts have not been fully resolved, leading to an acceleration of scale in pig farming - Vietnam has significant potential for the scale and intensification of pig farming, with family farms still being the main participants. However, the breeding system in Vietnam is relatively backward, and overall farming efficiency and costs are not internationally competitive. Since the first outbreak of African swine fever in 2019, Vietnam has been repeatedly disrupted by the disease due to high proportions of low-efficiency production capacities in small-scale farms, leading to a failure to fully recover pig inventories to pre-ASF levels. According to Wind data, by 2024, Vietnam's pig inventory is estimated to still be 11.1% lower than pre-ASF levels in 2018. As a result of the impact of African swine fever outbreaks, small and medium-sized pig farms in Vietnam have been accelerating their exit from the market since 2019. Additionally, policies related to pig farming in Vietnam further promote the acceleration of scale, providing opportunities for the expansion of large-scale enterprises. From an industry development perspective, Vietnam's pig industry is still in a period of industry development dividends. - Multinational companies and local groups accelerate the integration of the pig industry chain - In the process of development and integration of the pig industry in Vietnam, local group companies and multinational corporations, supported by policies, are gradually extending their traditional feed businesses to pig farming, achieving rapid expansion leveraging their own advantages in the industry chain. In terms of policies, since the reform and opening up, the Vietnamese government has maintained long-term support for foreign capital investment, with Foreign Direct Investment (FDI) being an important driver of economic growth. FDI enterprises in Vietnam are continuously increasing their investments in the pig industry, focusing on building an integrated industry chain. According to Vietdata data, in 2022, there were a total of 81 Foreign Direct Investment projects in the pig farming sector in Vietnam, accounting for more than 12% of Vietnam's total FDI that year. Currently, the pig sector in Vietnam is still in the land grab stage, with significant room for improvement in market share for leading pig farming enterprises, both multinational companies and local pig companies are actively expanding their capacities and seizing market share in recent years. Risks to watch out for: - Shenzhen Agricultural Power Group price volatility risks, disease risks, policy risks, food safety risks, and unexpected developments in overseas operations.