China Galaxy Securities: Pig farming has entered the stage of refined management competition. We highly recommend "big pig enterprise" Muyuan Foods (002714.SZ) and others.

China Galaxy Securities released a research report stating that the pressure on the 26-year-old sow stock has slightly eased, but the breeding efficiency (MSY, etc.) is still in an improving state (with a relatively slower growth rate), resulting in a significant increase in overall pig production in 26. This means that the average price of pigs during the same period has decreased year-on-year. Looking at the medium to short term, considering the rising trend in costs and the historical low pig prices, breeding farms/households are under pressure from dual pressures. The supply and demand contradiction is still sharp, and the institution believes that continued losses will accelerate capacity elimination, laying the foundation for future pig price reversals. The industry competition has entered the stage of refined management competition, coupled with the relatively low valuation of the pig farming industry, the institution focuses on recommending "large pig companies" Muyuan Foods (002714.SZ), Wens Foodstuff Group (300498.SZ), "medium and small pig companies" Tecon Biology Co. Ltd (002100.SZ), Yunnan Shennong Agricultural Industry Group (605296.SH), and pay attention to DEKON AGR (02419) and other quality pig companies in the sector. The main points of China Galaxy Securities are as follows: The trend of agriculture, forestry, animal husbandry, and fishery is under pressure, and the breeding industry is gathering momentum. From the beginning of 2026 to April 17th, planting industry and animal health performance were leading, with increases of 5.22% and 1.59%, respectively; feed and fisheries performed poorly, with decreases of 5.32% and 8.33% respectively. The pig farming index in this time period dropped by 3.27%. For the 2026 pig cycle allocation, the institution believes that in the darkest moment of the industry's continued losses, actively allocate high-quality breeding stocks, and wait for the significant elasticity brought by the future cycle reversal. The market share of listed pig companies reached a new high in 25 years, Q1 price & cost pressure increased together In 25 years, 16 listed pig companies collectively slaughtered 194 million pigs, a year-on-year increase of 16.8%; the market share reached 26.9% (up 3.5% year-on-year), hitting a historical high. Since 25 years, there has been an accelerated period of market share increase, with outstanding pig companies being able to maintain leading profits and widen the gap despite the pressure on pig prices and benefiting from continuous cost optimizations. In Q1 26, 16 listed pig companies slaughtered 47.89 million pigs, an increase of 9.4% year-on-year, a decrease of 10.7% month-on-month; the average wholesale price of corn was 2.33 yuan/kg, an increase of 7.9% year-on-year, an increase of 2.2% month-on-month; the average price of fattening pig feed was 3.38 yuan/kg, flat year-on-year, an increase of 0.6% month-on-month. Overall, the pig prices continued to decline quarter by quarter, and costs rose significantly, intensifying pressure. The contradiction between supply and demand of pigs is becoming apparent, monthly losses aggravate capacity elimination In March, the total sales volume of 16 listed pig companies was 17.77 million pigs, an increase of 39.7% month-on-month and 9.1% year-on-year; among them, leading pig companies Muyuan and Wens saw increases in slaughter volumes of 46.7% and 36.6% month-on-month, respectively; most small and medium-sized pig companies also increased month-on-month. From the price perspective, since 26, the monthly price of listed pig companies has continued to decline and is significantly below the industry average; the average weight has increased significantly. In terms of profits, the pressure on pig prices in March has intensified losses for the entire pig farming industry; although the leading pig companies perform relatively well in cost control, with the backdrop of new low pig prices, overall losses are inevitable. With the intensification of losses in April, the industry's capacity may accelerate elimination. Detailed explanation of capacity & efficiency framework, penetrating the long and short-term trends of pig prices The number of pigs slaughtered is mainly determined by capacity and breeding efficiency. The average estimated number of breeding sows in 26 is 40.8 million, a year-on-year decrease of 0.35 million, with a slowing decrease. Based on multiple assumptions, the institution estimates that the industry's MSY in 26 is about 18-18.5 pigs. The above assumptions do not consider the potential impact of the African swine fever entering China at the end of March, and will continue to track and adjust the estimated value of MSY in a timely manner. Based on this, the institution estimates the potential range of pig slaughter in 26 to be 7.2 billion to 7.4 billion, and the average annual pig price may significantly decrease. In the medium to short term, pig prices may rebound, but they are expected to return to a low-level fluctuating pattern within the year. Risk warning: risks that livestock and poultry prices do not meet expectations, risks of animal diseases, risks of fluctuating raw material prices, policy risks, risks of natural disasters, etc.