GF SEC: The sector continued to outperform in September; actively position for pig cycle opportunities.

GF SEC released a research report stating that in September, the national average live pig price was 10.49 yuan/kg, down 1.5% MoM and down 19.6% YoY. Pig prices continued to fluctuate at low levels, and the industry remained in a loss-making state. Based on comprehensive data on sows, live pig inventories, and feed, the bank is optimistic about future opportunities for a pig cycle reversal; the current sector valuation is at a historical low, highlighting allocation value, with a preference for leading enterprises with cost advantages. The inflection point for raw milk prices has emerged, and the bank remains bullish on the subsequent upward cycle in raw milk prices. GF SEC's main views are as follows: Livestock Farming According to Soozhu.com, in September the national average live pig price was 10.49 yuan/kg, down 1.5% MoM and down 19.6% YoY. Demand from "Double Festival" stockpiling provided limited support, pig prices in September continued to fluctuate at low levels, and the industry remained in a loss-making state. At the same time, piglet prices hovered at low levels, which may indirectly reflect relatively pessimistic restocking sentiment in the industry. Since September 2025, the industry's cumulative loss period has reached one year, pressure on capital chains has continued to accumulate, and sow production capacity is expected to continue declining. Winter is a high-incidence period for live pig diseases. Against the backdrop of prolonged operating losses, farming enterprises face greater epidemic prevention pressure, and close attention should be paid to live pig disease conditions after temperatures drop in the north. Based on comprehensive data on sows, live pig inventories, and feed, the bank is optimistic about future opportunities for a pig cycle reversal. The current sector valuation is at a historical low, highlighting allocation value, with a preference for leading enterprises with cost advantages. Among large-scale farming enterprises, key recommendations are Wens Foodstuff Group and Muyuan Foods Group; watch DEKON AGR and New Hope Liuhe; for targets with operating turnaround potential, watch Jiangxi Zhengbang Technology; for small and medium-sized farming enterprises, suggestions include watching Jiangsu Lihua Foods Group, Tecon Biology Co.Ltd, Yunnan Shennong Agricultural Industry Group, Tangrenshen Group, etc. In white-feathered chicken, according to Boyar & Hexun, in September the prices of live chickens and commercial day-old chicks were 3.03 yuan/jin and 2.1 yuan/chick, respectively, down 10.7% and 35.1% MoM. Integrated enterprises have significant operating advantages; watch Fujian Sunner Development, etc. In yellow-feathered chicken, according to New Poultry Situation, in September the price of medium-speed yellow-feathered chickens was 7.13 yuan/jin, up 14.1% MoM. Yellow chicken prices continued to rise in September, farming profitability was substantial, and Jiangsu Lihua Foods Group, Wens Foodstuff Group, etc. benefited fully. Dairy Cattle According to Wind data, in September the price of fresh milk in major domestic production areas was 3.07 yuan/kg, up 1.3% YoY and up 0.3% MoM. Boosted by holiday stockpiling demand, continued increases in bulk milk prices drove contract prices higher, and the industry has already entered a price increase cycle. As the effects of earlier capacity reduction and aging herds emerge in the future, supply may face a larger gap. In addition, downstream deep processing of dairy products is expected to provide new incremental demand. The inflection point for raw milk prices has emerged, and the bank remains bullish on the subsequent upward cycle in raw milk prices. In beef cattle, in September the average price of live cattle in Shandong Province was 30.09 yuan/kg, up 10.6% YoY and up 4.4% MoM. The contraction in domestic beef cattle supply, combined with a seasonal demand boost; on the import side, quota restrictions drove beef cattle prices higher, increasing the earnings elasticity of pastoral companies. Suggestions include watching YOURAN DAIRY, CH MODERN D, etc. Feed and Animal Health Pre-holiday demand support was limited. In September, overall aquatic product prices performed below expectations and showed significant divergence. Shrimp prices continued to rise due to tight supply (delayed stocking), indirectly reflecting that low shrimp in-pond inventories in September caused a contraction in shrimp feed demand. As this crop of shrimp enters the peak feeding period, shrimp feed demand is expected to improve significantly in Q4. For specialty fish, prices of varieties with increased spring stocking continued to come under pressure, while prices of varieties with declining stocking rose slightly. Overall fish prices for common freshwater fish (excluding tilapia) fell back within expectations. After two years of high prosperity, stocking of common freshwater fish increased significantly this year (excluding tilapia), and farming profits for common freshwater fish gradually returned to normal levels. In September, fishmeal prices remained volatile at 20,690 yuan/ton. Future price movements still require attention to trial fishing and quotas in South America's new fishing season, with the El Nino effect as the main variable. Against the backdrop of fishmeal shortages, feed enterprises' procurement and formulation capabilities are being tested this year, and differences in feed effectiveness are gradually becoming prominent. Enterprises with product strength advantages are expected to see a round of market share gains. The bank remains bullish on the earnings elasticity of leading shrimp and specialty feed companies with procurement and formulation advantages, and also bullish on leading enterprises' overseas feed business expansion maintaining rapid growth. In animal health, losses in live pig farming have led to cyclical pressure on industry demand, and industry competition continues to intensify. Pet medical care and synthetic biology technology have become entry tracks for animal health enterprises to break through growth ceilings. Key suggestions include watching Tianjin Ringpu Bio-Technology, Jinyu Bio-Technology, Tecon Biology Co.Ltd, etc. Risk Warnings Price fluctuation risk for Shenzhen Agricultural Power Group, disease risk, policy risk, etc.