上市捷报丨沙利文助力四川德康农牧食品集团股份有限公司成功赴港上市(2419.HK)

Sichuan Dekang Agricultural and Animal Husbandry Food Group Co., Ltd. (Stock Code:2419.HK) on2023year12month6The company successfully listed on the main board of the Hong Kong capital market. It is a rapidly growing livestock and poultry breeding enterprise in China, focusing on the breeding and farming of live pigs and yellow-feathered meat chickens. The company has a vertically integrated industrial chain in live pig and yellow-feathered meat chicken breeding, farming, and feed production, aiming to build a high-quality food manufacturing enterprise in China with full industrial chain capabilities. Frost & SullivanFrost & Sullivan,Frost & Sullivan, referred to below as the 'Sichuan DeKang Agricultural and Animal Husbandry Food Group Co., Ltd. Initial Public Offering (IPO) Industry Advisory Service Provider', hereby extends its warmest congratulations on its successful IPO.

Sichuan Dekang Agriculture and Animal Husbandry Food Group Co., Ltd. (hereinafter referred to as 'Dekang Agriculture and Animal Husbandry') was established in2023year12month6The company plans to go public on the 1st of July2691.210,000 sharesHstocks90%For international distribution,10%For public offering. The final issue price per share is36.95HK$, net proceeds from global offering approximately8.71HK$10 billion.

During the process of listing in Hong Kong this time, Frost & Sullivan mainly undertook the following tasks: helping the issuer accurately and objectively understand its positioning in the target market, using objective market data to discover, support and highlight the issuer's competitive advantages, assisting the issuer, investment banks and other intermediaries in completing the writing of relevant parts of the prospectus (such as overview, competitive advantages and strategy, industry overview, business and other important chapters), helping the issuer complete communication with the Hong Kong Stock Exchange and investors, assisting investors in quickly understanding the market ecosystem and competitive landscape, and assisting the issuer in completing feedback on various industry-related issues from the Hong Kong Stock Exchange.

Investment highlights

The company is a rapidly growing livestock and poultry breeding enterprise in China;

The company has a multi-party win-win farm model that scientifically improves breeding efficiency, with strong penetration and expansion capabilities;

The company has significant advantages in its advanced platform and technology system, with outstanding results;

The company has a sound animal health management system to ensure the safety of its biological and food products;

The company has an efficient and standardized operation and management system.

According to a report by Frost & Sullivan:

press2022In terms of annual pig sales volume, the company ranks sixth among pig farming enterprises in China;

press2022In terms of annual breeding pig sales, the company ranks tenth among breeding pig suppliers in China;

press2022In terms of the sales volume of parent stock yellow-feathered broilers, the company ranks second among suppliers in China;

press2022In terms of annual sales and volume of yellow-feathered meat chickens, the company ranks third among suppliers in China.

China's live pig breeding industry

Definition and Classification of Live Pigs

Live pigs can be mainly divided into two categories based on their use: breeding pigs and commercial meat pigs. Breeding pigs refer to breeding boars and breeding sows specifically used for breeding production. Commercial meat pigs (including commercial piglets) are the main type of live pigs used for trading and producing pork products, among which commercial piglets refer to those with a certain weight6till25Kilogram small commodity pork pigs.

Main live pig breeding models

China's pig breeding model mainly includes 'farmhouse free-range breeding', 'company-operated breeding', and 'company+Family farms" for breeding. "Company-operated" refers to companies building breeding communities, hiring labor for large-scale breeding, including breeding, fattening, and other related procedures. "Company+The 'family farm' scale breeding model can be further divided into 'company-provided pigs' based on the types of live pigs provided by the company to family farms+Commodity Piglet Fattening Farm" (i.e., the No.1 Family Farm model) and "Company+Sows' Breeding and Fattening Farm' (i.e., the No. 2 Family Farm Model).

Source: Frost & Sullivan report

Laying Hogs and Inventory

The number of live pigs slaughtered, including breeding pigs and commercial meat pigs, was2017Year-end2018The year maintained relative stability, and by2018year693.8Decreased by one million2020year527.0One million heads, mainly due to African swine fever2018It broke out in China at the end of the year. Due to the still strong consumer demand for live pigs in China, and with effective prevention and control of African swine fever and large-scale expansion by more live pig farms, the live pig slaughter volume in2021The year has seen a strong recovery. The expected output of live pigs will be2027Year-on-year increase to710.0One million, itself2022The compound annual growth rate from inception to0.3%The Chinese live pig breeding market is extremely fragmented, and2022In [year], the annual output exceeded500The output of large-scale farms at the head level accounts for only a fraction of the total output60.8%, And the United States has exceeded97.0%.

Looking ahead, as the Chinese government has prioritized food safety and quality policies, continuously introducing and implementing stricter standards for pig production industry, market integration is expected to accelerate. Large enterprises with strong core competitiveness will benefit from this.

Source: Frost & Sullivan report

The competitive landscape of the Chinese live hog market

China's live hog market is extremely fragmented.2022In terms of the sales value and volume of live pigs, the top ten participants accounted for the total market share respectively,19.9%and18.0%The Group ranks sixth in both live pig sales value and volume.

Source: Frost & Sullivan report

China breeding pig market

Overview of the Breeding Pig Market

The pig breeding system includes three generations: grandparental generation, parental generation, and sire-generation. Breeding pigs mainly include purebred pigs and dual-purpose crossbred pigs. Pure breeding refers to the offspring pigs produced by parents of the same breed. Grandparental generation can be further divided into core breeding populations and first-level extension groups based on their function within the breeding system. Core breeding populations are used for cultivation and testing within the pig industry to determine the quality of breeding pigs in the system. First-level extension groups consist of pigs selected from the core breeding populations, responsible for supplying purebred pigs downstream and expanding in scale to support the production of hybrid pigs and commercial meat pigs. Dual-purpose crossbred pigs refer to pigs produced by crossing two different breeds or categories of pigs.

Sow breeder providers focus on seeking high-quality genetics by introducing high-quality grandparent and growing parent pigs. Compared to local sows, imported purebred pigs perform better in terms of reproductive ability, feed conversion rate, and growth speed. The breeding breeds imported into China mainly include Yorkshire, Duroc, Landrace, and Buckskin. The use of dual-purpose hybrid sows is the most common and commercially valuable method in the Chinese sow market. The following diagram illustrates the hybrid breeding model:

Source: Frost & Sullivan report

Sows include breeding sows and boars. China's live pig breeding market is cyclical, and the demand for breeding sows fluctuates with downstream product demand.2018Year-end2019In [year], the total inventory of breeding pigs in China was2018year8month to2019year7During the month, there was a sharp decline due to the outbreak of African swine fever in China. The total inventory of breeding pigs was at2022Year rebound to44.1One million,2018Year-end2022The compound annual growth rate for the year is3.5%Yu2020In [year], due to the strong demand for live pigs from downstream industries and the lack of purebred and dual-purpose crossbred pig supplies, some producers adopted triple-cross sows with lower breeding efficiency, resulting inPSYLow and high feed conversion rates. Yu2021In [year], the gap in breeding pigs was significantly alleviated. In the future, it is estimated that the total inventory of breeding pigs will fluctuate slightly, and by2027Annual achievement43.3One million,2022Year-end2027The compound annual growth rate for the year is-0.4%.

Source: Frost & Sullivan report

Competitive landscape of the Chinese breeding pig market

As an industry standard, several large-scale pig farming companies adopt the 'company-operated' model. Refers to several types of pigs that are only for internal use and not sold externally. For industry-leading breeders, most of their breeding pigs are for internal use to maintain the breeding of commercial meat pigs. Therefore, China's breeding pig market is relatively decentralized in terms of external sales.2022In [year], the company was one of the top ten pig breeders in China in terms of sales volume. In terms of the inventory of core breeding stock and genetic materials from previous generations, the company is a leading hog supplier in the industry in China. The table below lists details of the company's main competitors and its ranking in China:

Source: Frost & Sullivan report

Overview and Market Size of China's Broiler Chicken Industry

Overview of Yellow-feathered Meat-type Broilers

Yellow-feathered broiler chickens refer to chicken breeds raised specifically for producing yellow-feathered broilers. As of2021At the end of the year, there were a total of97A yellow-feathered broiler breed has been officially identified and registered by the National Genetic Resources Committee for Livestock and Poultry, including60A national variety,36Local varieties and1A variety for cultivation.60The main varieties of this country come from Guangdong and the Guangxi Zhuang Autonomous Region, accounting for63.3%Others36The local breeds come from various provinces in China, indicating a long history of breeding and rich breeding resources for yellow-feathered broilers in China.

Market scale of parent stock yellow-feathered broiler chickens

In the past few years, due to the impact of African swine fever on the live pig breeding industry, the inventory of Chinese broiler breeder hens has achieved stable growth, from2018year37.5One million sets increased to2020year43.0One million sets, due to consumers seeing chicken as an alternative to pork.2021After a slight year-on-year decline, due to(i)The end-of-year hog inventory and production recovered, and(ii)In that year, the price of poultry feed continued to rise.2018Year-end2022In the year, the inventory of parent stock broilers of Huangyu breed remained at1.0%The compound annual growth rate is increasing. In the coming years, the inventory of parent generation yellow-feathered broilers is expected to reach2027year42.0One million sets, self2022The compound annual growth rate since inception is1.5%.

Source: Frost & Sullivan report

The competitive landscape of the Chinese parent stock broiler market

The market for parent stock broilers in China is highly concentrated.2022In terms of the sales volume of parent stock yellow-feathered broilers, the top three participants account for the total market share:51.0%In terms of the sales volume of parent stockbred yellow-feathered broilers, the company is2022The second-largest parent stock broiler supplier in the country, market share19.3%.

Source: Frost & Sullivan report

China Yellow-feathered Broiler Breeding Value Chain

The value chain of the broiler farming industry in China is typically divided into three major sectors: upstream, midstream, and downstream. The midstream mainly includes feed suppliers, animal health suppliers, equipment suppliers, breeding suppliers, farms, and individual farmers. The downstream consists of traders, slaughterhouses, fresh markets, and chicken product processors.

Source: Frost & Sullivan report

Market scale of yellow-feathered broilers

Yellow-feathered meat chickens are a traditional poultry breed in China, renowned for their unique meat flavor and excellent taste. The output of yellow-feathered meat chickens is from2018year3,963.0Rapid increase of one million to2019year4,559.0One million, due to a reduction in pork supply. Subsequently, the demand for poultry increased, further driving the expansion of the yellow-feathered broiler industry. However, this wave of expansion reached2020The year began to slow down as China's pig herd recovered.

In addition, the outbreak of COVID-19 has also affected the yellow-feathered broiler industry. The live poultry market and wholesale fresh markets are the main sales points for yellow-feathered broilers.2020year1Since the start of the month, many live poultry markets have been closed due to concerns about COVID-19, although most Chinese cities have lifted traffic controls and many live poultry markets are still not open. As a result, the output of yellow-feathered broilers has been2022Year-on-year decline3,730.0One million.

As the COVID-19 pandemic gradually subsides and consumers' demand for high-protein, low-fat meats continues to grow, the output of yellow-feathered meat chickens is expected to gradually recover.2024The annual output reached a relatively high level. Yu2022Year-end2027In the year, the output of broiler chickens is expected to be around3,730.0One million increased to about4,080.0One million.

Source: Frost & Sullivan report

Competitive landscape of the Chinese yellow-feathered broiler market

The Chinese broiler market is relatively concentrated. In terms of sales value and volume of broilers, the top five participants are2022Proportion of total market share in each year44.5%and43.8%Yu2022In [year], in terms of the sales value and volume of yellow-feathered broilers, our group ranked third, with market shares of2.7%and2.1%.

Source: Frost & Sullivan report

Market-driven factors

· China's economic growth and sustained urbanization

With the stable growth of the Chinese economy, continuous urbanization, and consumption upgrading, more and more Chinese consumers are willing to consume high-protein, low-fat meats (such as chicken). According to data from the US Department of Agriculture, China's chicken consumption has2018year11.6One million tons increased to2022year16.1One million tons, compound annual growth rate8.5%, and it is expected to commence from2022Starting from4.6%The compound annual growth rate increased to2027year20.1One million tons.

· The booming new retail model and Chinese catering market

Commodity broiler producers have penetrated regional markets by leveraging the booming online retail model and China's fast and convenient distribution network. In recent years, data-driven new retail models and efficient supply chains have risen, driving the sales of chilled/frozen chicken products and providing an excellent customer experience. In addition, Chinese cuisine, as the main consumption occasion for yellow-feathered broilers, accounts for the largest share of China's catering market and has shown a growth trend over the past few years, expected to2023Year-end2027The year will see growth. The aforementioned factors have changed the yellow-feathered broiler industry and are expected to drive chicken consumption in China.

· Scale development and industrial chain extension

The large-scale development of the industry helps reduce management costs and promotes the application of new technologies. The integration of the commodity broiler industry is expected to improve product quality and safety, extending the industrial chain into downstream deep processing areas, thereby enhancing product value, such as cooking chicken and chicken snacks. In addition, compared to companies that only participate in a part of the value chain, integrated companies engaged in the entire industry's industrial chain business can ensure upstream raw material supply, stable raw material prices, and downstream product quality.

· Diversified chicken products meet various consumer needs

Chicken products on the market are becoming increasingly diverse in variety, such as black-bone chickens and yellow-bone chickens, and their consumption methods are also becoming more varied to meet consumers' various needs and comply with dietary habits of different regions. Therefore, it is expected to cover more consumer groups in the future.

· Changes in consumption structure and nutritional structure

Today, consumers are increasingly pursuing healthy diets, characterized by low fat, low calories, low sugar, as well as high fiber and high nutrition. Therefore, it is expected that in the future, there will be a demand for products with relatively low fat and high protein. Consumption of high-quality chicken will increase.

View the full prospectus

Frost & Sullivan has rich research experience in the catering and food industry, assisting well-known enterprises in successfully listing on the capital market. Recent successful listings include Kung Pao Circle. （ 2517.HK), Davis Commodities（ NASDAQ:DTCK), Zhenjiao Lidu 6979.HK), Dazhi Shares 1405.HK), Bai Guoyuan2411.HK), Aroma2147.HK), Weilong9985.HK), Shuangcai Zhuang2321.HK), Youran Animal Husbandry9858.HK), Jiǔjiǔ Wáng1927.HK), Yum China9987.HK), Nongfu Spring9633.HK), Fengxiang Food9977.HK), Simore6969.HK), China Feihai6186.HK), China Tobacco International6055.HK), Premium360（2360.HK), Wugu Millhouse1837.HK), Baby Tree1761.HK), Haidilao6862.HK), sustainable agriculture8609.HK), Longhui Holdings1007.HK), Xinhong International1587.HK), Yiyuan Liquor Industry8146.HK), Jierong International2119.HK), Bingshi International1705.HK), Nissin Foods1475.HK), Asian groceries8413.HK), Zhouhei Duck1458.HK), COFCO Meat1610.HK), Yihai International1579.HK), Zhongdi Dairy (1492.HK), Dali Foods3799.HK), Manor Ranch1533.HK), Wanzhou International0288.HK) etc.