Wanlian Securities: Pig prices drop, performance under pressure, focus on the pace of production capacity digestion.

Guangdong Securities released a research report stating that the performance of the agriculture, forestry, animal husbandry, and fishery sector in 2025 will be under pressure due to the downward trend in pig prices. Looking at different sectors, the planting industry, Shenzhen Agricultural Power Group processing, and animal health sectors show improving profit margins, while other sectors' performance declined year-on-year. As the younger generation gradually becomes the main force behind pet ownership, the penetration rate of pet consumption in China is expected to increase annually. Currently, the concentration in the pet food industry is low, and local companies are gradually rising, offering significant growth potential. It is recommended to focus on the performance of leading companies in pig farming during the pace of capacity digestion and the growth space of high-quality domestic leaders in the pet food industry. Guangdong Securities' main points are as follows: Overall Industry: In 2025, the agriculture, forestry, animal husbandry, and fishery sector's profit declined year-on-year due to the decreasing pig prices. The total operating income of the sector was 1,278.269 billion yuan, a year-on-year growth of 2.63%, ranking 14th in the Shenwan primary industry. The total net profit attributable to the parent company was 30.206 billion yuan, a year-on-year decrease of 38.51%, ranking 29th in the Shenwan primary industry. The sector's ROE, gross profit margin, and net profit margin all slightly decreased, with the ROE at 5.49%, a year-on-year decrease of 3.73 percentage points, and gross profit margin and net profit margin at 10.74% and 2.43%, respectively, down by 0.88 and 1.53 percentage points. Planting Sector: In 2025, the planting sector achieved revenue of 102.781 billion yuan, a year-on-year increase of 1.93%, with a net profit attributable to the parent company of 3.04 billion yuan, a year-on-year increase of 28.28%. The sector's profit significantly improved, with improving performance margins. The sector's gross profit margin and net profit margin were 14.07% and 2.92%, respectively, increases of 0.97 and 1.33 percentage points year-on-year. Feed Sector: In 2025, the feed sector achieved revenue of 28.620 billion yuan, a year-on-year increase of 9.27%, with a net profit of 3.539 billion yuan, a year-on-year decrease of 54.55%. Most individual stocks saw an improvement in revenue, but the sector's performance was dragged down by the leading company, Guangdong Haid Group, with a decrease in profit year-on-year. The sector's gross profit margin and net profit margin were 10.32% and 1.40%, respectively, decreases of 1.32 and 1.59 percentage points year-on-year. Shenzhen Agricultural Power Group Processing Sector: In 2025, the Shenzhen Agricultural Power Group processing sector achieved revenue of 34.429 billion yuan, a year-on-year decrease of 2.67%, with a net profit of 5.625 billion yuan, a year-on-year increase of 14.52%. Although the sector's revenue slightly decreased, profits increased year-on-year. The sector's gross profit margin and net profit margin were 7.71% and 1.68%, respectively, increases of 0.87 and 0.34 percentage points year-on-year. Livestock Sector: In 2025, the livestock sector achieved revenue of 49.124 billion yuan, a year-on-year increase of 3.57%, with a net profit of 18.551 billion yuan, a year-on-year decrease of 45.92%. The sector suffered significant losses due to the downturn in pig prices. The sector's gross profit margin and net profit margin were 11.56% and 3.86%, respectively, decreases of 2.77 and 3.63 percentage points year-on-year. Risk factors: Increased market competition risk, rising cost risk, and disease control risk.