CICC released a research report maintaining its net profit forecasts of RMB760 million/RMB1.15 billion for COFCO JOYCOME (01610) for fiscal years 2025/2026. The current stock price corresponds to 10x/7x P/E for 2025/26, and the firm maintains its outperform rating. The bank expects improved liquidity to boost valuations in Hong Kong's pig farming sector, raising the target price by 39% to HK$2.5, corresponding to 14x/9x P/E for 2025/26 and representing 33% upside potential.
The company announced H1 2025 revenue increased 19.8% year-over-year to RMB8.963 billion. Net profit before/after biological asset fair value adjustments was RMB198 million/RMB317 million, up RMB52 million/RMB0.1 million year-over-year respectively. Performance met the bank's expectations, with profit growth driven by stable pig farming production rhythm, cost improvements, and significant loss reduction in the fresh meat business.
CICC's main viewpoints are as follows:
**Pig Farming Returns to High-Quality Growth, Fresh Meat Business Achieves Operational Breakthrough**
According to company announcements: 1) Pig farming: Slaughter volume returned to high-quality growth. H1 2025 revenue increased 68.7% year-over-year to RMB4.494 billion, mainly due to slaughter volume rising 83% year-over-year to 2.899 million heads; average selling price for commercial pigs declined 4.5% year-over-year to RMB14.59/kg. Additionally, the company expanded its "company + farmer" model, with the new model contributing to slaughter volume growth. 2) Fresh pork: Quality persistence, channel deepening, and brand promotion led to fresh meat segment breakthrough. H1 2025 fresh pork revenue increased 21% year-over-year to RMB2.54 billion, with branded revenue share rising 4.5 percentage points to 31.2%. Branded boxed pork sales increased 47% to 27.79 million boxes, flaxseed pork sales surged 123% year-over-year. H1 2025 losses reduced by RMB23.34 million year-over-year. 3) Feed business: H1 2025 feed business revenue decreased 3.7% year-over-year to RMB3.127 billion, with sales volume up 1.6% year-over-year to 958,000 tons. 4) Processed meat and meat imports: Processed meat revenue remained flat at RMB380 million; meat import revenue increased 16.4% year-over-year to RMB1.22 billion.
**Farming Costs Continue to Improve, Financial Position Remains Stable**
According to company announcements: 1) Farming management: Special campaigns to reduce farming costs resulted in steady cost decline. The bank estimates Q2 2025 total cost at RMB13.0-13.5/kg. The bank expects costs to further optimize in H2 2025 as the company's efficient breeding pig system takes effect, the proportion of COFCO's characteristic "company + farmer" farming model increases, and key farming efficiency indicators improve. 2) Financial situation: Balance sheet remains stable with leverage ratios at relatively low levels among peers. Asset-liability ratio at end-H1 2025 increased 0.3 percentage points from end-2024 to 53.2%, due to payment for COFCO Jiahua acquisition, causing slight increase in net debt year-over-year.
**Asset-Light Model Marginally Enhances Pig Farming Slaughter Flexibility, Brand Strategy Drives Long-term Performance Release in Fresh Business**
According to company announcements: 1) Pig farming: Operational production efficiency improvements and cost reductions return to healthy growth trajectory. On the cost front, the company promotes cost reduction involving all factors, processes, and personnel, establishing special improvement tasks that may enhance cost competitiveness. Regarding slaughter volume, the company's current biological assets totaled RMB2.79 billion at end-H1 2025, up 16.9% from end-2024. Additionally, the company intensified exploration of asset-light farming models, which the bank believes could support 2025 slaughter volumes of 5-6 million heads. 2) Fresh pork: Brand-led strategy shows effectiveness. The company currently focuses on improving fresh product quality, expanding sales channels including leading supermarkets, upgraded department stores, and top e-commerce platforms, and conducting precise consumer group communications. The bank believes profit contribution is expected to gradually increase.
**Risk Factors:** Pig prices below expectations; slaughter volume below expectations; epidemic risks; cost inflation pressures.