CICC: Maintain DEKON AGR (02419) outperform rating with a target price of HKD 111.

Zhongjin released a research report stating that it predicts that DEKON AGR (02419) will see a decline in the central pig price in 2026, introducing a net profit of 4.2 billion yuan in 2027. Taking into consideration the historical industry average market value, the target price is maintained at 111 Hong Kong dollars with an outperform industry rating, corresponding to 23/9 times P/E for 26/27. The current price corresponds to 17/6 times P/E for 26/27, with a 41% upside potential. Dekon announced its performance, with a 3.1% year-on-year increase in revenue to 23.16 billion yuan in 2025, falling within the forecast range and meeting market expectations. The bank judges that the company's competitiveness in pig farming costs ranks among the top in the industry. Key points from Zhongjin: - Pig farming is realizing the guidance set at the beginning of the year, maintaining steady growth. - Pigs: In 2025, revenue increased by 3% year-on-year to 18.8 billion yuan, and the number of pigs slaughtered increased by 23% year-on-year to 10.83 million. The bank judges that the company controlled losses, reduced costs, and adjusted product structures in the second half of 2025, turning the business around. Slaughtering and auxiliary products: In 2025, revenue increased by 55% year-on-year to 1.4 billion yuan; the increase in revenue was due to increased slaughtering, with a slaughter volume of 840,000 pigs, a year-on-year increase of 93%. - Cost optimization, stable funds, and enhanced core competitiveness. 1) Cost reduction and efficiency improvement: The company achieved significant cost reductions through lean management, breeding results transformation, and light asset operation. The bank calculates that the complete cost of pig farming for 2025 was less than 12.5 yuan/kg, a year-on-year decrease of 1-1.5 yuan/kg; the company announced that the average total yield of piglets per sow in the Dekon II series reached 18.5, with an annual efficiency increase of 2000 yuan per parent sow. 2) Stable funds: At the end of 2025, the asset-liability ratio was 61.9%, a decrease of 2.5 percentage points from the end of 2024; the company optimized its debt structure, with a 7.9% year-on-year decrease in current liabilities in 2025 and a current ratio of 1.4. - Light asset, low cost, leading agriculture and driving growth with the Second Farm Model. The bank believes that 1) Light assets: The company has innovated the lighter asset model of the Second Farm, with a total asset of 2166 yuan/head in 2025, a 15% year-on-year decrease. The light asset model combined with excess profit capabilities are expected to lead the industry in terms of ROE. 2) Low cost: The company has lean management, independent breeding barriers, and disease purification management capabilities, and is expected to continue the trend of increasing efficiency and reducing costs. 3) High-quality growth: Deepening the mechanism of leading and supporting agriculture, the company announced in 2025 that the cooperative farmers, output, and fees for single household breeding in the Second Farm have increased, laying a solid foundation for long-term and standardized development. Risk warning: Pig prices and slaughtering volume are lower than expected; epidemic risks; price increases in raw materials exceed expectations.