CITIC Securities: There will be differentiation in the pig farming sector. Companies with high efficiency and low costs will gain a competitive advantage.

CITIC Securities pointed out that the current pig price has fallen below the cash flow cost of breeding enterprises, and the industry has entered a deep loss phase, but it is expected that the pig price will still bottom out for some time. The decline in the prices of piglets, sows, and culled sows implies that the industry is entering a destocking cycle. The speed of destocking sows will determine the pace of industry capacity contraction and subsequent rebound strength. The sustainability of the decline in piglet prices and culled sow prices will be important indicators to observe. The stock prices of the pig farming sector have historically bottomed out earlier than pig prices, and the phase of capacity destocking is a better interval for relative returns in the pig farming sector; CITIC Securities believes that there will be differentiation in the pig farming sector in the future, with high efficiency and low cost enterprises gaining a competitive advantage, and the current position is suitable for positioning on the left side.