The world's leading pig farming enterprise, Muyuan Foods Group Co.,Ltd. (002714.SZ), has recently released a severely disappointing earnings forecast. Hit by a sharp decline in pig prices, the company expects a net loss for the first half of the year, with a net loss after deducting non-recurring gains and losses exceeding 5.5 billion yuan, a stark contrast to the 10.677 billion yuan profit recorded in the same period last year.
Signs of performance pressure at Muyuan Foods were already evident. Impacted by the downward trend in pig prices, although the company's revenue reached a record high last year, it experienced "revenue growth without profit growth." In the first half of this year, the company's performance pressure intensified, with consecutive losses in Q1 and Q2. Notably, in recent years, despite operating in a downturn cycle, Muyuan has continued to expand capacity counter-cyclically, which not only dragged down its gross margin but also placed the company under heavy financial strain. By the end of last year, the company's short-term debt gap had exceeded 34 billion yuan. This poses a severe challenge to its plans to develop new growth engines by scaling up its slaughter and meat processing business and expanding into overseas markets. To alleviate capital pressure, in February of this year, Muyuan Foods completed its Hong Kong IPO, raising over 10 billion yuan, with approximately 60% of the funds intended for overseas market expansion. Whether Muyuan Foods, under the dual pressures of low pig prices and insufficient liquidity, can achieve a counter-cyclical breakthrough through overseas expansion remains to be seen over time.
Pig Price Below Cost Leads to First-Half Loss
Listed in 2014, Muyuan Foods is primarily engaged in pig breeding, sales, and pig slaughtering, with main products including commercial pigs, piglets, breeding pigs, and related processed products.
The earnings forecast indicates that for the first half of 2026, Muyuan Foods expects a net loss attributable to the parent company of 5.7 billion to 6.7 billion yuan, a year-on-year decline of 154.13% to 163.63%, compared to a profit of 10.53 billion yuan in the same period last year. The net profit after deducting non-recurring gains and losses is expected to be a loss of 5.5 billion to 6.5 billion yuan, a year-on-year decline of 151.51% to 160.88%, compared to a profit of 10.677 billion yuan a year earlier.
Muyuan Foods stated that in the first half of this year, the company deepened pig health management and production management, improving refined management capabilities. While pig farming costs decreased compared to the same period last year, the average selling price of commercial pigs fell significantly year-on-year to about 10.4 yuan per kilogram, a drop of approximately 28%, leading to an operating loss for the company.
Signs of performance pressure at Muyuan Foods were already evident. As a leading global pig farming enterprise by output, Muyuan Foods' performance is highly correlated with the pig cycle. Since 2025, due to ample supply in the domestic hog market, pig prices have remained persistently low. Last year, the average live pig price was 14.44 yuan per kilogram, a year-on-year decline of 9.2%, hitting a new low since 2019. In Q3 and Q4 of last year, Muyuan Foods' profitability continued to decline. For the full year of 2025, although the company's revenue reached a peak of 144.1 billion yuan, its net profit after deducting non-recurring gains and losses fell by 14.71% year-on-year to 15.99 billion yuan.
In Q3 and Q4 of last year, although Muyuan Foods was under significant performance pressure, it still maintained profitability. However, in the two quarters of the first half of this year, the company fully transitioned to a loss-making state. Data shows that in the first half of this year, the average selling price of Muyuan Foods' commercial pigs declined quarter by quarter, falling from 12.57 yuan per kilogram in January to 9.65 yuan per kilogram in June, a cumulative decline of 23%. In the first half of this year, Muyuan Foods sold a total of 38.615 million commercial pigs, a year-on-year increase of 0.58%, but sales revenue was only 50.145 billion yuan, a year-on-year decrease of nearly 30%.
It is worth noting that in March of this year, Muyuan Foods' complete pig farming cost had just dropped from 12 yuan per kilogram at the beginning of the year to 11.6 yuan per kilogram. However, the company's cost reduction was far slower than the decline in pig prices, resulting in a situation where "the more you sell, the more you lose."
Quarterly, in Q1 of this year, Muyuan Foods achieved revenue of 29.89 billion yuan, a year-on-year decrease of 17.1%; net profit attributable to the parent company was -1.215 billion yuan, a year-on-year decrease of 127.05%; net profit after deducting non-recurring gains and losses was -1.141 billion yuan, a year-on-year decrease of 125.32%.
Based on this, in Q2 of this year, Muyuan Foods achieved a net profit attributable to the parent company of -4.485 billion to -5.485 billion yuan, a year-on-year decrease of 174.27% to 190.83%; net profit after deducting non-recurring gains and losses was -4.359 billion to -5.359 billion yuan, a year-on-year decrease of 170.67% to 186.88%.
From the above data, the loss scale of Muyuan Foods in Q2 of this year showed a significant expansion trend both year-on-year and quarter-on-quarter. Looking at the longer term, from Q3 of last year to Q2 of this year, the company's profitability has shown a trend of accelerating decline quarter by quarter. This also reflects the heavy cost of Muyuan's capacity expansion during the downturn cycle: when pig prices fall below the cost line, the larger the company's capacity, the deeper the loss.
Two Main Business Lines Underperform, Gross Margin Plummets from Peak
In recent years, Muyuan Foods' gross margin has also shown a significant downward trend.
Affected by the African Swine Fever epidemic, domestic pig prices peaked in 2020. That year, Muyuan Foods' gross margin was as high as 60.68%. In the following years, domestic pig prices showed a sharp downward trend. Accompanied by continuous capacity expansion, Muyuan Foods' operating costs continued to rise, and the company's gross margin fell sharply. By 2025, the company's gross margin had dropped to just 17.82%. In the first quarter of this year, this indicator further slipped to 5.17%, a year-on-year plunge of over 14 percentage points.
From the perspective of main business lines, squeezed by persistently low pig prices and rising costs, the gross margin of Muyuan Foods' core pig farming business has been under significant pressure in recent years, falling from a high of over 60% in 2020 to 17.29% last year.
Since 2019, Muyuan Foods has begun to deploy its slaughter and meat processing business, attempting to make it a core growth point for its full industry chain layout. This business has grown rapidly in recent years, with its revenue accounting for over 30% of the farming business revenue last year. However, the gross margin of this business has long been below 2%. Last year, the business achieved profitability for the first time, but its gross margin was still only 2.67%.
Against the backdrop of weak performance in both of the company's main businesses, Muyuan Foods is attempting to break through from two dimensions. On one hand, the company is trying to enhance the scale and gross margin of its slaughter and meat processing business through measures such as expanding capacity, optimizing product structure, and increasing investment in smart and digital technologies. On the other hand, the company is trying to find new growth breakthroughs through overseas expansion.
However, to achieve these two major goals, Muyuan Foods must first confront the funding challenge. For years, the company's capital expenditure has remained high, and assets like pig barns face mortgage difficulties when applying for medium and long-term loans, leading to a high proportion of short-term debt in the company's liabilities and persistently high financing costs. By the end of last year, the company's total liabilities reached 93 billion yuan, of which short-term borrowings and non-current liabilities due within one year totaled as high as 48.646 billion yuan, while the company's monetary funds were only 13.86 billion yuan, resulting in a short-term debt gap of over 34 billion yuan.
Against this backdrop, in April last year, Muyuan Foods initiated its plan for a Hong Kong listing. In February of this year, the company's 274 million H shares were officially listed and traded on the main board of the Hong Kong Stock Exchange, with net proceeds from this offering amounting to approximately 10.47 billion Hong Kong dollars.
According to Muyuan Foods, approximately 60% of the net proceeds will be used to explore overseas opportunities and expand the business landscape, including strengthening supply chain development for global expansion; enhancing market layout and coverage in Southeast Asian countries like Vietnam and Thailand; and advancing strategic initiatives such as mergers, acquisitions, and minority equity investments. The remaining funds will be used for R&D investment and as working capital for the company.
Recently, during an exchange with investors, Muyuan Foods disclosed that after achieving profitability for the first time last year, its slaughter and meat processing business has also been profitable from January to April this year, with continuously improving operating performance. In the future, the company will take measures such as advancing capacity construction, expanding and optimizing sales channels, and optimizing product structure (extending towards high-value-added products) to enhance the scale and profitability of this business.
Regarding the overseas business, this is a long-term priority for the company, which has progressed from an asset-light service output model to a stage of co-operation with local enterprises and capacity implementation. Currently, Muyuan Foods' joint venture and self-built projects in Vietnam are progressing in an orderly manner, with a joint venture pig farm recently commencing operations. In 2026, the company will further intensify its overseas expansion efforts, with the key focus this year being to build and stabilize an overseas team and fully replicate its high-standard operating model overseas.
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