CMSC: Decline in pork prices drags down profits, leading feed enterprises show impressive performance.

CMSC released a research report stating that, in the first quarter of 2026, due to the sharp decline in pork prices, listed pig enterprises fell into comprehensive losses. The industry is accumulating momentum for an upward cycle. "Low-cost+" pig enterprises may continue to improve cash flow and increase intrinsic value. The inventory of parent chickens has decreased to a low level, and the outlook for the industry is favorable. Leading feed companies continue to increase market share, and overseas markets maintain high growth. At the bottom of the cycle, it is recommended to seize the opportunity for the intrinsic value enhancement of leading pig enterprises and the overseas expansion of leading feed companies to open up growth space. The main points of CMSC are as follows: Pig farming: Pork prices are bottoming out, accumulating momentum for an upward cycle In the first quarter of 2026, due to the sharp decline in pork prices, listed pig enterprises fell into comprehensive losses, with 18 listed pig enterprises collectively losing 7.15 billion yuan, turning losses year-on-year and reducing losses month-on-month. However, there is still a large variance in industry costs, and the cost advantages of quality pig enterprises are further expanding. The operating cash flow of listed pig enterprises turned negative month-on-month, capital expenditure remained at a low level, and the asset-liability ratio slightly increased. With deep losses in the industry and capacity control intensifying, it is expected that the speed of mother pig capacity reduction will increase, further raising the central price of pigs in 2026. The cash flow of "low-cost+" pig enterprises may continue to improve and intrinsic value may increase. Poultry farming: Significant improvement in the sector in 2025, excellent performance of poultry enterprises in the first quarter of 2026 In 2025, the poultry farming sector's revenue increased by 8% year-on-year, and non-net profit decreased year-on-year. In the first quarter of 2026, the sector's revenue increased by 12% year-on-year, and non-net profit decreased by 8% year-on-year. 1) Broilers: The overall pressure on imported breeder sources since the beginning of the year is expected to have a high breeding status for parent broiler chickens in 2026, which will also affect the supply of commercial breeder chicks. Bullish on the breeding status of poultry. 2) Yellow feather chicken: The current inventory of parent chickens has dropped to historically low levels, coupled with industry losses of more than half a year in 2025, the supply shrinkage lays the foundation for the subsequent rise in chicken prices. Since the fourth quarter of 2025, yellow chickens have entered an upward cycle, with chicken prices significantly rebounding, and it is expected that the high breeding status of yellow chickens in 2026 will continue. Post-cycle: Strong companies in the industry continue to grow, and leading companies expand overseas while maintaining high growth In terms of feed, in the first quarter of 2026, influenced by the sharp decline in pork prices, losses in pig farming dragged down the profitability of feed companies, with 9 feed companies collectively losing 980 million yuan, turning losses year-on-year and reducing losses month-on-month. Looking ahead to the second quarter of 2026, the aquafeed market may experience seasonal warming, and leading feed companies are expected to continue to increase their market share through procurement and formula advantages. In addition, the overseas expansion of leading feed companies may open up growth opportunities. In terms of animal protection, in the first quarter of 2026, the industry still faces strong competitive pressure, and with the impact of increased taxes, six animal protection companies achieved a profit of 410 million yuan, a decrease of 11% year-on-year. Profitable animal protection companies with product strength are expected to rebound first. Seeds: Optimistic about the recovery of the maize seed industry, focusing on the catalysis of extreme weather In 2025, the seed industry sector improved, but was under pressure in the first quarter of 2026. Domestic corn seed inventory is high, and it is expected that there may be a decline in the area of corn seed processing in 2026, as corn seed processing has been decreasing for three consecutive years, the supply and demand pattern of the corn seed industry is expected to improve. Transgenic corn/soybeans have entered the stage of nationwide conventional planting, and the industry may accelerate its concentration towards leading companies. The rice seed industry entered the destocking stage in 2024, with some high-quality varieties experiencing structural supply tightness. Overall, the policy foundation of the seed industry has solidified, and the industry is moving in a positive long-term direction. The period of El Nino attenuation leads to frequent regional disasters, increasing demand for resistant varieties, and opening up space for high-quality, high-priced products. A research-oriented leading company is recommended. Investment recommendations Pork prices are accumulating momentum for an upward trend, and feed companies are expanding overseas to open up growth opportunities. For pig farming, with deep industry losses and intensified capacity control, it is expected that the speed of mother pig capacity reduction will increase, raising the central pork price in 2026. The cash flow of "low-cost+" pig enterprises may continue to improve, and their intrinsic value may increase. Muyuan Foods and Wens Foodstuff Group are recommended, with a focus on Yunnan Shennong Agricultural Industry Group, DEKON AGR, Leshan Giantstar Farming & Husbandry Corporation, Tecon Biology Co. Ltd, Dongrui Food Group, and COFCO JOYCOME. For poultry farming, there is overall pressure on imported breeder sources, and the outlook for poultry breeding is favorable. The production capacity of parent yellow chickens has dropped to historically low levels, and it is expected that the high breeding status of yellow chickens will continue in 2026. Fujian Sunner Development and Jiangsu Lihua Foods Group are recommended. In the post-cycle period, leading feed companies continue to increase their market share, and overseas expansion opens up growth opportunities. Guangdong Haid Group and Wuhan Keqian Biology Co., Ltd are recommended, with a focus on Jinyu Bio-Technology and Tianjin Ringpu Bio-Technology. Risk warning: The price of Shenzhen Agricultural Power Group does not rise as expected; the sales/cost of listed companies do not meet expectations; sudden and uncontrollable epidemics on a large scale; major food safety incidents; policy disturbances, etc.