Muyuan expects a first-half pre-loss of 5.7 billion to 6.7 billion yuan; cost-cutting and the slaughtering business provide a buffer

Live hog prices have remained at a low level, and Muyuan Co., Ltd. (MUYUAN), the leading hog breeding company, posted interim losses in the first half of the year.

On July 11, Muyuan Co., Ltd. released its 2026 first-half performance forecast. The company expects that net loss attributable to shareholders of listed companies will be between RMB 5.7 billion and RMB 6.7 billion in the first half, compared with a profit of RMB 10.53 billion in the same period last year.

From an operating perspective, hog prices are still the core variable affecting Muyuan’s performance. Since the beginning of this year, the company’s average selling price for commodity hogs has remained low, and from March to June for most of the time it has hovered around RMB 10 per kilogram.

However, amid overall pressure on the industry, Muyuan’s cost improvement continues.

The company disclosed that, as of May this year, the fully-burdened cost of hog breeding had fallen to RMB 11.6 per kilogram, further approaching the company’s full-year target of falling below RMB 11.5 per kilogram. The cost for its excellent farm lines has been stably controlled at below RMB 11 per kilogram, with the best-performing farm line below RMB 10.5 per kilogram.

Muyuan Co., Ltd.’s President Gao Tong said that the company proposed in 2022 a target to reduce costs by RMB 600 per hog. By the end of May this year, it had already completed RMB 323, leaving RMB 277 of cost improvement space.

Next, the company plans to further standardize the experience of excellent farm lines in healthy management, feed efficiency, and production performance through technological innovation and management optimization, and replicate it across more farm lines.

Muyuan’s current operating focus has shifted to improving the operational quality of existing production capacity. For large-scale breeding enterprises, slight improvements in indicators such as feed-to-meat ratio, survival rate, average daily weight gain, and disease prevention and control—after scaling up through tens of millions of head for slaughter—may all translate into relatively noticeable cost changes.

In addition to its main breeding business, the slaughtered meat business has also become an important supplement for Muyuan during periods when the cycle is at a low point.

Muyuan began planning its slaughtered meat business in 2019, and achieved annual profitability for the first time in 2025. According to the company’s disclosure, in the first and second quarters of 2026, the slaughtered meat segment remained profitable.

Qin Muyuan, Chief Executive Officer of Muyuan Meat, said that in 2025 the company’s self-slaughter share was 36.75%, and there is still significant room for growth—this is also the profit potential for slaughtered meat going forward.

Next, Muyuan will continue to optimize sales channels and product structure, increase the proportion of segmented and portioned products, and further promote improvements in slaughter scale and profitability.

At this stage, the significance of the slaughtered meat business for Muyuan is mainly reflected in extending the industrial chain and buffering fluctuations in the breeding cycle.

Because the breeding business still dominates the company’s overall profits, the slaughter segment is not yet able to fully offset the pressure caused by low hog prices. However, continued profitability indicates that the slaughter capacity the company built earlier is gradually entering a release phase.

Improvements in the financial structure also provide a certain buffer for Muyuan to deal with the industry downturn.

As of the end of the first quarter of 2026, Muyuan’s asset-liability ratio was 50.73%, down 3.42 percentage points from the beginning of the year. Total liabilities decreased by more than RMB 3.1 billion from the beginning of the year, and cash and cash equivalents reached RMB 14.27 billion.

The company said it has basically completed the construction of large-scale hog breeding capacity. In the future, capital expenditures for domestic breeding operations will gradually decline, and the incremental capital expenditure needs for the slaughtered meat business are also relatively limited.

From an industry perspective, the hog market is still at the bottom of the cycle, but marginal changes have already appeared. As the industry continues to incur losses and the inventory of sows kept for breeding is gradually reduced, the earlier capacity de-escalation is increasingly being transmitted to the supply side of commodity hogs.

However, whether a rebound in hog prices can be sustained still depends on the extent of subsequent capacity de-escalation, the schedule of commodity hog slaughter, and the recovery of terminal consumption.

Over a longer cycle, the progress in cost reduction, profitability of the slaughter business, and optimization of the financial structure will determine Muyuan’s profit elasticity in the next round of industry recovery.

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