Goldman Sachs: lowers target price for Muyuan Foods (02714) to 64 Hong Kong dollars, expecting hog prices to bottom out and rise again.

Goldman Sachs released a research report stating that it is expected that mainland China's pig prices have reached a bottom, and the industry is currently at the bottom of the cycle, with the potential for a cyclical rebound. The bank has lowered the target price for Muyuan Foods (02714.HK) from 68 Hong Kong dollars to 64 Hong Kong dollars, and for Muyuan Foods (002714.SZ) A shares from 62 Chinese yuan to 58 Chinese yuan, both maintaining a "buy" rating. The bank stated that the current pig prices have dropped to a low of 8.7 Chinese yuan per kilogram, the lowest in 25 years, with almost all producers in a cash loss situation, and medium-sized farms are expected to exit in the short term. The bank expects the industry's effective pig slaughter volume to shrink by 4% to 7% year-on-year in the next few quarters, driving pig prices to rise to 15 Chinese yuan per kilogram in the second half of the year, and further increase to 15.3 yuan in 2027. Goldman Sachs has lowered Muyuan Foods' 2026 recurring profit forecast by 17% to reflect lower pig price assumptions, while forecasts for 2027 and 2028 remain largely unchanged. The bank believes that Muyuan's H-share stock price has 35% downside to reset value estimation, 10% upside compared to historical lows, and 60% upside compared to the mid-cycle value, making the risk-return profile attractive.