CMSC: Maintaining a "highly recommended" rating for DEKON AGR, showcasing the cost advantage of pig production and the contributions to profit from broiler chickens.

CMSC released a research report stating that it maintains a "strong recommendation" investment rating for DEKON AGR (02419). Taking into account changes in the national policy on regulating pig production capacity and the bank's judgment on pig and chicken prices, it is expected that the company's net profit adjusted for fair value of biological assets in 2025-2027 will be 14.4/30.9/50.8 billion yuan, with EPS of 3.7/8.0/13.1 yuan, respectively. Dekon's livestock and poultry costs in 2025 are at the industry-leading level, with the yellow chicken business turning losses around in Q4 and contributing significantly to profits. Marginal improvements in the slaughter and meat sector in the second half of the year are significant, and the overall performance is in line with expectations. CMSC's main points are as follows: Significant advantages in livestock and poultry costs, turnaround in the yellow chicken business in Q4 The company is expected to achieve a pre-adjustment net profit of 13-15 billion yuan in 2025, with a pre-adjustment net profit of 0.27-2.27 billion yuan in the second half of 2025. Despite the low livestock and poultry prices in the second half of the year, the company is actively promoting cost reduction and efficiency improvement in livestock and poultry, with significant excess advantages. By business segment: 1) Pigs: The company is expected to slaughter 10.83 million pigs in 2025, up 23% year-on-year, with 5.71 million pigs slaughtered in the second half of the year; approximately 3.1674 million pigs slaughtered in Q4 2025, with an average selling price of about 11.7 yuan/kg, and annual profitability per head is also at the industry-leading level. 2) Yellow-feathered chickens: The company is expected to slaughter 88.14 million broilers in 2025, up 0.02% year-on-year, with 45.43 million yellow chickens slaughtered in the second half of the year; approximately 21.65 million broilers slaughtered in Q4 2025, with an average selling price of about 15.33 yuan/kg, and an estimated profit per head of 2-3 yuan in Q4 2025, with a significant improvement in the poultry sector in Q4 2025. In addition, the slaughtering and food business is still in a strategic investment stage. Overall, the company's leading advantages in livestock and poultry farming are significant, and profit performance meets expectations. High-quality pig companies focus on tapping cost potential, and the yellow-feathered chicken industry's prosperity is on the rise 1) Pigs: Policy-guided capacity regulation combined with long-term industry losses may accelerate the clearance of sows and further raise expectations for future pig prices. Currently, there is a large variance in industry costs, and value tapping projects led by leading companies may last for years, with cost-efficient companies still expected to obtain excess profits. 2) Poultry: The current breeding stock of parent breed chickens has dropped to historically low levels, laying the foundation for a contraction in supply and subsequent price increases for chickens; the yellow chicken industry entered an uptrend in prosperity starting in Q4 2025. Dekon has been deeply involved in the pig and yellow-feathered chicken farming industry for a long time, and its accumulated breeding advantages make its livestock and poultry costs ahead of its peers 1) Pigs: The company has long been committed to tapping cost potential, with current total costs already reduced to around 12 yuan/kg, firmly in the top tier of the industry; there is still room for further cost reductions in the future. The company plans to focus on developing the No. 2 family farm model under policy guidance, driving cooperation with farmers and actively responding to the national call, demonstrating the responsibility of leading pig companies. 2) Yellow-feathered chickens: Dekon's yellow-feathered chicken business ranks third nationwide, especially with the high-end variety represented by the unique "beard chicken," which has a good reputation and profitability in the past. Risk factors Livestock and poultry prices do not rise as expected; risks of natural disasters; risks of rising feed ingredient costs; risks of animal diseases; risks of food safety.