In-Depth Analysis of the Cyclical Turning Point and Valuation Recovery in the Hog Farming Industry

Now I will prepare a systematic and comprehensive hog cycle analysis report for you:

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Based on the latest industry data [1][2], the 2025 hog market as a whole presents a pattern of “high in the first half, low in the second half, oscillating to find a bottom”:

Indicator	2024	2025	YoY Change
National Average Live Hog Price	17.0 yuan/kg	14.5 yuan/kg	-14.7%
Breeding Sow Inventory	40.6 million head	39.0 million head	-3.9%
Industry Status	Profit Recovery	Loss-Making Bottoming	In-depth Adjustment

In 2025, hog prices bottomed out for the first time at 10.9 yuan/kg in mid-October, then rebounded slightly before bottoming out again. As of early December, the average price of outer ternary hogs was approximately 11.3 yuan/kg [1]. The industry has been in full-scale loss since late September, with the maximum loss per self-raised and self-bred hog reaching 245 yuan/head, and the maximum loss per purchased piglet reaching 375 yuan/head.

Capacity deleveraging features a dual-driver model of “policy guidance + loss-driven”:

: The Ministry of Agriculture and Rural Affairs held three symposiums on hog production capacity regulation in 2025, with core regulation directions [1]:

• Capacity Regulation: Reduce breeding sow inventory by “1 million head each” for leading enterprises and all regions nationwide
• Slaughter Weight Control: Maintain a 120kg slaughter weight standard throughout the year, “crack down on secondary fattening”
• Funding: Prohibit issuing loans and subsidies for capacity expansion projects such as new or expanded pig farms

: Changes in productive biological assets of major listed hog enterprises in Q3 2025 [1]:

• Muyuan Foods: -24% (3.035 million breeding sows at the end of September, a decrease of 126,000 head from June)
• Wen’s Group: +7%
• New Hope: -29%

: Small and medium-sized farmers are accelerating their exit from the market, with the discount ratio for culled sows dropping to 0.71 by the end of September [1].

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Based on the hog production cycle rule (approximately 10-month transmission cycle from breeding sows to market hogs), we make the following judgment on the cyclical turning point:

2025 Q1-Q2    2025 Q3-Q4    2026 Q1-Q2    2026 Q3-Q4
     ↓              ↓              ↓              ↓
Capacity Deleveraging    Accelerated Deleveraging     Supply-Demand Balance     Cyclical Turning Point
Ongoing          Policy Intensified       Bottoming Out Stabilized       Price Rise

: [1][2].

Variable	Critical Threshold	Current Status	Expected Change
Breeding Sow Inventory	37-38 million head	39.0 million head	Need to deleveraging an additional 2-3 million head
MSY (Marketable Hogs per Sow)	27	26	Marginal improvement is slowing
Hog Price Cost Line	13 yuan/kg	11.3 yuan/kg	Cost advantage expanding
Secondary Fattening Inventory	Low	Being deleveraged	Continue to decrease

:

• If breeding sow inventory drops to 38 million head by the end of 2025 and continues to be deleveraged
• Leading to a year-on-year decline in market hog slaughter volume in August-October 2026
• Combined with relatively stable demand (dominated by seasonal fluctuations)
• Improved supply-demand pattern drives hog price recovery [2]

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Cost is the core factor for hog enterprises to navigate the cycle, and the cost advantage of high-quality enterprises continues to expand [3]:

Company	2025 Full Cost	Advantage vs Industry Average	Profit Status
Muyuan Foods	11.3 yuan/kg	2.2 yuan/kg	Profitable even in industry troughs
Wen’s Group	13.4 yuan/kg	0.1 yuan/kg	On the verge of loss
New Hope	13.7 yuan/kg	-	Under significant pressure with losses
Industry Average	13.5 yuan/kg	-	Full-scale loss

[3]:

1. Integrated Industrial Chain
   : Reduce transaction costs in intermediate links
2. Low-Protein Diet Technology
   : Soybean meal proportion reduced to 7.3% (industry average 13.7%)
3. Intelligent Farming
   : Labor efficiency increased from 300 hogs per person per year to 500 hogs per person per year
4. Scale Effect
   : 2025 slaughter volume exceeded 57 million head, with a market share of 12.8%

Company	2024 Global Market Share	2025 China Market Share	Industry Status
Muyuan Foods	5.6% (World’s No.1)	12.8%	Absolute Leader
Wen’s Group	-	7-8%	Second Tier
TOP10 Enterprises Combined	-	35%	Continually Increasing

Leading enterprises, relying on their cost advantages, can maintain or even expand production capacity during industry troughs, and market share continues to concentrate [1][3].

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Based on the latest trading data [0]:

Company	Market Capitalization (100 million yuan)	PE(TTM)	PB	ROE	Historical PE Percentile
Muyuan Foods	2763	11.72	3.38	29.21%	3%
Wen’s Group	1210	13.91	2.56	19.01%	15%
New Hope	420	44.39	1.71	-	85%
Industry Average	-	20-25	-	-	50%

[3][0]:

• Current PE(TTM) is 11.72 times, which is at an extremely low historical level (2.88% percentile in the past 5 years)
• Historical median PE is approximately 25 times
• Theoretical Valuation Recovery Potential: +113%
• Reasonable Valuation Range: 350-390 billion yuan (stock price: 64-71 yuan/share)
• 30-43% upside potential
  compared to the current market capitalization of 276.3 billion yuan

[0]:

• Current PE(TTM) is 13.91 times
• Historical median PE is approximately 22 times
• Theoretical Valuation Recovery Potential: +58%
• 2025 projected net profit is 5.0-5.5 billion yuan, in line with expectations

Catalyst	Trigger Condition	Expected Impact
Hog Price Turning Point	Hog prices rebound to above 15 yuan/kg in Q3 2026	Earnings forecast upward revision + valuation expansion
Capacity Deleveraging	Breeding sow inventory drops below 38 million head	Improved industry sentiment expectations
Expanded Cost Advantage	Muyuan Foods’ full cost drops to 10.5 yuan/kg	Market share increase + valuation premium
Cash Flow Improvement	Operating cash flow turns positive	Expected balance sheet repair

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1. Cycle Position
   : Currently at the cyclical bottom, with accelerated capacity deleveraging and the turning point approaching
2. Valuation Margin of Safety
   : The sector’s PE is at a historical low, with Muyuan Foods’ PE(TTM) only 11.72 times, which is highly attractive
3. Cost Barrier
   : The cost advantage of high-quality hog enterprises is expanding, strengthening their ability to navigate the cycle
4. Growth Logic
   : The trend of industry concentration is clear, with leading enterprises continuing to expand their market share

Target	Ticker	Core Logic	Rating
Muyuan Foods	002714.SZ	Global leading cost, large valuation recovery potential, stable leading position	Top Recommendation
Wen’s Group	300498.SZ	Dual main business of hogs and chickens, continuous cost improvement, low valuation	Focus
Shennong Co.	605296.SZ	Regional leader, obvious cost advantage	Beneficiary Target
Tiankang Bio	002100.SZ	Regional advantage in Northwest China, low valuation	Beneficiary Target

Risk Type	Specific Description	Risk Level
Hog Price Fluctuation Risk	If capacity deleveraging falls short of expectations, the timing of hog price rebound will be delayed	Medium
Disease Risk	Recurrence of African Swine Fever and other epidemics may impact production capacity	Medium-High
Policy Risk	The intensity of capacity regulation policies falls short of expectations	Low
Debt Risk	Some hog enterprises have high debt ratios, with cash flow under pressure	Medium

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:

• Hog prices are expected to usher in a cyclical turning point in the second half of 2026
  , with the core logic being that breeding sow capacity continues to be deleveraged to the balanced range of 37-38 million head, leading to a shift from growth to decline in market hog slaughter volume
• Key factors to monitor for turning point realization:
  speed of breeding sow deleveraging, impact of diseases, changes in secondary fattening inventory

:

• Muyuan Foods
  : Current PE(TTM) is 11.72 times (extremely low historical percentile), with a reasonable valuation corresponding to 30-43% upside potential and a theoretical valuation recovery potential of over 100%
• Wen’s Group
  : Current PE(TTM) is 13.91 times, with a valuation recovery potential of approximately 58%
• High-quality hog enterprises have better safety margins and greater upward flexibility during the cyclical bottom due to their cost advantages

: It is recommended to gradually accumulate positions in high-quality hog enterprises in the current cyclical bottom area, with a focus on Muyuan Foods, the industry leader with obvious cost advantages and high valuation safety margin.

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[1] Sina Finance - 2026 Agri-Forestry-Animal Husbandry-Fishery Industry Strategy: Industrial Transformation and Upgrading, Waiting for the Cyclical Turning Point (https://finance.sina.com.cn/stock/relnews/cn/2026-01-07/doc-inhfnvip7408565.shtml)

[2] Modern Animal Husbandry Daily Telegraph - 2025 Hog Market Annual Review: Seeking the Cyclical Turning Point Amid Overcapacity and Demand Differentiation (http://www.chinafeedm.com/h-nd-30795.html)

[3] Xueqiu - Muyuan Foods Valuation Analysis (https://xueqiu.com/7700058255/368788330)

[0] Jinling AI Securities API Data