China Galaxy Securities: The digestion of pig farming capacity may accelerate, continuing to focus on key industries while taking both offense and defense to seize opportunities.

China Galaxy Securities released a research report stating that they continue to emphasize the layout opportunities in the pig farming industry with both offense and defense capabilities. Based on the consideration of the value of breeding sows and farming efficiency, pig prices are expected to decrease year-on-year in 2026, with potential rebound during the period; taking into account the policies of capacity reduction and industry losses, the focus is on high-quality pig enterprises with significant changes in marginal costs and good capital conditions. Attention can also be paid to companies in the post-cycle of the breeding chain and animal vaccine related enterprises. Considering the relatively low supply of yellow-feathered chickens and improving demand expectations. In the pet food industry, which is in a growth process, high-quality enterprises are showing an increasing market share. Key points from China Galaxy Securities: - In January 2026, CPI increased year-on-year, while Shenzhen Agricultural Power Group recorded a trade deficit of -8%. - In February, the agricultural index performed weaker than the Shanghai and Shenzhen 300 Index. - Pig farming: Pig prices fluctuated downward in February, resulting in losses for self-bred and self-raised pigs again. - Pet food: Exports were slightly under pressure in 2025, with an increase in quantity but decrease in prices. Risk Alerts: Risks include livestock prices not meeting expectations, animal diseases, fluctuating raw material prices, policy risks, and natural disasters.