Zhongjin: The cost-effectiveness of imported brands in the United States is decreasing, and domestic high-end brands of pet food are expected to benefit first.

CICC released a research report saying that recently, China has increased the tariff rate on imported goods from the United States to 125%. The bank believes that the cost-effectiveness of American imported pet food brands may be further weakened. Leading the trend of high-end domestic pet food brands, represented by Frencat under Gambol Pet Group (301498.SZ), has opened and led the golden age of domestic high-end pet food, and is expected to continue to lead the domestic pet food market. The main viewpoints of CICC are as follows: In 24 years, China imported $2.441 billion worth of American pet food, mainly high-end pet food According to the General Customs Administration data, in 24 years, the amount of pet food imported from the United States to China was $2.441 billion (accounting for 69% of pet food imports), a 7% decrease year-on-year. The trend of domestic high-end pet food brands replacing American brands has already begun. According to Euromonitor data, in 23 years, the sales of top American pet food brands accounted for approximately 4% of the total pet food market size/high-end pet food market size in China. Among them, ACANA/Desire/Nourish overall market share rates were 1.4%/1.3%/1%, with market share rates in the high-end market at 4.3%/4.1%/3.1%, with a combined revenue of approximately $1.9 billion, mainly consisting of high-end products priced at over 80 yuan/kg. As the cost-effectiveness of American imported brands decline, domestic high-end brands like Frencat are expected to take on a larger share The leading American imported pet food brands in China include Natural Balance/Nourish/Desire/ACANA, with flagship main products priced in the mainstream range of 90-150 yuan/kg, mainly in the high-end price range of over 80 yuan/kg. The bank believes that the increase in tariffs on American imports may significantly raise costs for American imported pet food brands, creating significant price pressure and supply disruptions, amplifying the cost-effectiveness advantage of domestic brands. The bank predicts that domestic high-end brands like Frencat under Gambol are positioned to take advantage of the market share relinquished by American high-end brands, leading to a continuous increase in market share in the high-end market. China's pet food industry has entered an accelerated phase of high-end transformation, with domestic high-end brands leading the golden age The bank believes that 1) the high-end pet food market continues to expand: the base of high-end pet food consumers in China continues to grow. According to Euromonitor, the market space for high-end cat food in China reached $9.3 billion in 24 years, with a CAGR of 19% from 19 to 24, accounting for 30% of the market share, and there is still significant room for improvement compared to the high-end cat food market shares of 48% in the United States and 56% in Japan. 2) Initial signs of success in the high-end transformation of domestic brands: domestic high-end brands, led by Frencat under Gambol, have identified consumer pain points and continuously innovated around concepts supported by science, such as fresh meat and baking, entering the market with differentiated products and quickly responding to the trend of baking food, successfully entering the high-end market. According to Jiuqian and Feigua, in 24 years, Frencat/Desire/ZIWI online sales increased by +149%/+1%/-6% year-on-year, with Frencat remaining the largest high-end domestic brand and expected to lead the industry into a golden age of "domestic high-end transformation" by increasing market share. Valuation and recommendation The bank is optimistic about the excess growth and high-end capabilities of leading companies in the domestic pet food market. Maintain coverage of profitability forecasts, ratings, and target prices unchanged. Risk warning: fluctuations in raw material prices, exchange rate risks, trade friction risks.