Wens Foodstuff Group: Leveraging Pig Farming Momentum Amid Poultry Woes

In the volatile world of agribusiness, Wens Foodstuff Group (300498.SZ) has emerged as a masterclass in strategic sector diversification and cost management. While the poultry segment grapples with a low-profit environment, the company's pig farming division has surged ahead, driven by aggressive cost reductions, operational efficiency, and a disciplined approach to debt. For investors, the story of Wens is one of resilience: a business that has not only weathered sector-specific downturns but has also positioned itself to capitalize on cyclical recoveries.

Pig Farming: A Cost-Cutting Powerhouse

Wens' pig farming operations have been the cornerstone of its 2024–2025 success. By slashing production costs from CNY 16.8/kg in 2023 to CNY 13/kg in 2025, the company has created a moat of profitability even as live pig prices dipped. This cost leadership stems from a combination of internal operational improvements (60% of savings) and external factors like lower feed prices. The result? A 16.26% year-on-year revenue increase in the first half of 2025, with net profit soaring 159.12% to CNY 3.475 billion.

The company's “company + farmers” model further amplifies its advantage. By controlling 1.78 million breeding sows and outsourcing finishing pigs to contracted farmers, Wens ensures genetic quality while minimizing capital intensity. This structure allows it to scale production rapidly—targeting 33–35 million pigs in 2025—without overextending its balance sheet.

Poultry Woes: A Temporary Headwind

The poultry sector, however, has been a drag. In H1 2025, chicken prices fell to a five-year low, pushing Wens' poultry segment into losses. Sales revenue dropped 9.29% year-on-year to CNY 15.127 billion, as average prices plummeted 18.43% to CNY 10.84/kg. Oversupply, weak domestic demand, and competition from cheaper pork have exacerbated the situation.

Yet, this downturn is not a death knell. Wens has already begun applying its pig farming playbook to poultry: automation, digital tools, and lean management. The company's 2025 capital expenditure of CNY 50 billion includes poultry-specific upgrades, such as AI-driven feed optimization and disease monitoring systems. These investments aim to narrow the cost gap with competitors and restore profitability.

Debt Metrics: A Clean Bill of Health

Wens' financial discipline is another pillar of its strategy. The debt-to-asset ratio has fallen for five consecutive quarters, reaching 50.57% as of June 2025, a level that balances growth with stability. This improvement is critical in an industry prone to cyclical shocks. By prioritizing debt reduction while reinvesting in core operations, Wens has created a buffer against market volatility.

Investment Thesis: Diversification and Cyclical Recovery

For investors, Wens offers a compelling mix of short-term resilience and long-term potential:
1. Pig Farming Momentum: With costs at a 3-year low and capacity expansion underway, the division is poised to outperform even if hog prices moderate.
2. Poultry Recovery Signals: Seasonal demand (back-to-school, Mid-Autumn Festival) and falling feed costs could catalyze a rebound in H2 2025. Analysts project chicken prices to stabilize by Q4.
3. Strategic Debt Management: A leaner balance sheet enhances creditworthiness and provides flexibility for M&A or further cost-cutting.

Risks and Watchpoints

• Poultry Market Volatility: A delayed recovery could pressure margins. Monitor CNY/kg chicken prices and feed cost trends.
• Regulatory Risks: Biosecurity regulations or trade policy shifts could disrupt operations.
• Debt Sustainability: While current leverage is healthy, aggressive capex must be balanced with cash flow.

Conclusion: A Buy for the Patient Investor

Wens Foodstuff Group exemplifies how strategic diversification and cost discipline can turn sector-specific challenges into opportunities. While the poultry segment remains a near-term drag, the company's pig farming dominance and improving debt profile provide a solid foundation. For investors with a 12–18 month horizon, Wens offers exposure to a business that is not only surviving but innovating in a high-stakes industry.

In the end, the key takeaway is clear: Wens is not just riding the pig cycle—it's engineering its own future.