From Cycle to Value: Muyuan's Spectacular Transformation

Ask AI · How can the slaughtering business become the key engine behind Muyuan’s value transformation?

By Xiao Li Feidao

On March 27, Muyuan Co., Ltd. released its full-year 2025 results, achieving a net profit of RMB 15.8 billion, once again proving the company’s ability to weather cycles.

Behind this, it is inseparable from the cost “moat” built through technological innovation over many years. In addition, the slaughtered meat “second growth curve” business has gained momentum, further driving the company’s transformation from a cyclical stock into a value stock—its importance is no longer something to be underestimated.

【Operational resilience in evidence】

In 2025, Muyuan’s revenue was RMB 144.145 billion, up 4.5% year over year, setting yet another annual record high, with attributable net profit of RMB 15.487 billion, while many pig companies fell back into losses again.

You should know that the full-year average live hog price was RMB 14.4 per kilogram, the lowest level since 2019. Yet Muyuan still demonstrated strong operational resilience.

Muyuan’s biggest core competitive advantage over competitors comes from its livestock farming cost edge. In 2025, the company’s fully loaded cost was about RMB 12 per kilogram, with an annual decrease of 14.3%, which was higher than the concurrent decline in hog prices. This not only achieved the target set at the beginning of the year, but also led the industry average by about 20%.

▲Muyuan’s cost advantage, source: compiled by Yi Fan

Over the years, Muyuan has continued technological innovation across 20 areas, including breeding, feed, health, farming, and barns, continuously improving pig productivity, material efficiency, and human productivity, with its farming performance yielding solid results. From 2023 to 2025, the company’s fully loaded cost of pig farming fell cumulatively by RMB 3.7 per head. The expected target for 2026 is to further reduce it to around RMB 11.5 per kilogram.

Against the backdrop of sustained profit recovery, the company’s net operating cash inflow has exceeded RMB 30 billion for two consecutive years, its debt level has continued to decline, and its financial structure has become even healthier. Total liabilities for the year decreased by RMB 17.1 billion, exceeding the target by a wide margin. The company’s latest asset-liability ratio is 54.15%, down nearly 8 percentage points from the 2023 peak, already back to a safe and steady level.

In addition, Muyuan’s latest bank credit lines and various financing instruments have ample room. Combined with the fact that its cash cost is RMB 2 per kilogram lower than its fully loaded cost, its cash flow is abundant and steady—allowing it to respond calmly to future low-hog-price cycles.

With a stronger ability to generate cash flow, Muyuan also has a solid foundation for high dividends. For FY 2025, Muyuan is expected to distribute another RMB 2.435 billion in dividends. Together with the amount already distributed in the first half of the year, the full-year total dividends would be RMB 7.438 billion, with a dividend payout ratio as high as 48%, honoring prior commitments and sharing the company’s development results with retail and small investors.

【Slaughtering becomes a new growth pole】

Among the 2025 operating results, the strong growth of Muyuan’s slaughtered meat business is a bright spot.

For the full year, this business generated revenue of RMB 45.23 billion, up 86.3% year over year, and for the first time achieved full-year profitability—completing a fundamental transformation from the cultivation period to contributing profits.

Muyuan’s entry into the slaughtering business began in 2019, when it aligned with the national policy shift from “transporting live pigs” to “transporting meat.” By the end of 2020, Muyuan put its first slaughter plant into operation in Nanyang County (Neixiang), officially starting operations. After that, the company built several slaughter plants around the main livestock production regions, continuously increasing its production scale. By the end of 2025, the business had spread across 20 provinces and cities nationwide, with more than 70 sales branches established.

From 2020 to 2025, over six years, the slaughtering business revenue grew by more than 70 times, with its compound annual growth rate ranking first among China’s large peers in the same industry. The share of revenue has also risen sharply: in 2025, it became a core segment contributing nearly one-third of the company’s revenue, and the value of its second growth tier has begun to be realized.

▲Change in Muyuan’s slaughtering business revenue, source: compiled by Market Value Observer

Looking ahead, Muyuan’s slaughtered meat business will still have strong growth potential.

In 2025, the slaughtering volume more than doubled, reaching 28.66 million head. In 2026, it will continue to increase slaughter scale, with an internal target of more than 38 million head. Beyond that, there are more ways to improve profitability from a pricing perspective.

On the cost side, it can continue to reduce costs and improve efficiency. Compared with ordinary small and medium slaughter plants, Muyuan’s slaughtering business has natural advantages, including reduced transportation losses from nearby transport, and lower slaughtering losses brought by intelligent equipment and process improvements. In terms of production efficiency and operational capabilities, there is still room to further refine operations to control costs.

At the channel level, the proportion of agricultural wholesale markets is about 70%, while major customers such as supermarkets, catering, and food processing enterprises account for about 30%. The latter channel has higher barriers and involves building a sales network for operations, so its profitability is naturally more attractive. Muyuan plans to further tilt resources toward this latter channel.

At the product level, currently the share of fine-cut segmentation is relatively small, but profitability is higher than that of chilled pork cuts sold as “white-strip” (white hog carcass products/white-trimmed meat). Constrained by the construction of segmentation centers and the move toward more refined operations, the company needs to proceed step by step. With the expansion of total slaughter volume, the proportion of fine-cut segmentation is still expected to gradually increase.

As can be seen, Muyuan’s slaughtered meat business will continue to grow, and its share of revenue is likely to keep rising. So, this new performance pillar will have important and far-reaching impacts on Muyuan’s overall operations.

On the one hand, as a downstream business, slaughtering allows Muyuan to trace back to its breeding activities, providing data support to upstream livestock farming. Through coordinated management between livestock farming and slaughtering, it can create synergy, thereby enhancing product value. Based on calculations, once slaughtering achieves scaled profitability, it may generate an additional value of RMB 50–80 per hog.

On the other hand, if the slaughtering business can maintain long-term stable profitability, it will become one of the “stabilizers” in overall performance, and it can also give the company stronger value-stock characteristics.

Consider a long-term assumption: in the future, if two-thirds of Muyuan’s livestock farming scale comes from the company’s own slaughtering, the profit per head could be roughly estimated at at least RMB 100. Then the slaughtering business would generate stable profitability of at least RMB 50 billion per year. If a 15x valuation multiple is applied, then the long-term value of the slaughtering business could exceed RMB 750 billion.

In China’s A-share market, WH Group (Shuanghui Development) is the benchmark leader in slaughtering and meat products. The market prices it as a value stock, granting a PE valuation of nearly 20x—far higher than the valuation level for livestock farming of around 10x. Looking at Hong Kong stocks, Wanzhou International (WH Group) has recently been repeatedly refreshing highs and has rebounded more than twofold from the 2023 bottom.

In the future, as Muyuan’s slaughter scale continues to rise and profitability is fully realized, the value and importance of this business are self-evident.

【Transformation from cyclical to value】

At present, there are still some voices in the capital market believing that Muyuan is a cyclical stock with a certain growth attribute, and that its current valuation is higher than that of most peer hog companies—this is understandable.

In the view of Market Value Observer, this market positioning may not be entirely fair. In fact, Muyuan has basically completed its transformation from a cyclical stock to a value stock.

Looking back at performance: since its A-share listing in 2014, except for 2023, it has achieved solid profits every year. Especially since 2019, Muyuan has accumulated profits of more than RMB 80 billion, while most peers have essentially given back the high hog price premium brought by the African swine fever outbreak; in some cases, pig companies have even been forced into bankruptcy restructuring.

No matter how hog prices fluctuate, Muyuan’s resilient profit performance in its livestock farming business proves its ability to operate through cycles, and its earnings cyclicality has been greatly weakened.

Generally speaking, beyond the feature that cyclical stocks’ performance comes with large swings in prices, the capital market’s definition of cyclical stocks also includes periodic changes in which capital expenditures remain on an upward trend.

In July 2025, with the start of anti-“involution” measures, China’s pig industry also faces major and profound changes.

Anti-“involution” is a long-term policy. Its direction is to shift the industry from competition driven by scale expansion to high-quality development centered on cost control, livestock farming efficiency, and product quality. This shift may significantly weaken the hog price cycle that used to swing widely. In the long run, hog prices are expected to enter a more stable central range (in the short term, hog price will be affected by controlling the number of breeding sows and then the timing until hogs are ready for market; it takes at least 10 months to see effectiveness).

This measure will make it difficult for future pig companies to blindly increase production capacity. It will drive the pig industry to continue lowering capital expenditures, and future pig companies are also likely to return a larger portion of their profits to investors through dividends. Therefore, the cyclical characteristics on the above front will also be greatly weakened.

The shift from cyclical to value often also implies an important change in valuation.

Coal is a typical example. For many years, coal was a typical cyclical stock, with coal prices, capacity, and performance all fluctuating sharply with the cycle. Until September 2020, when China officially announced the “dual carbon” goals (carbon peak before 2030 and carbon neutrality before 2060), the market began to believe that capital expenditures in the coal industry would decline in an irreversible manner. Even if coal prices rose again, it would be impossible to massively add capacity. Combined with rising dividend payout ratios, the market started to take the change in “coal’s attribute” seriously.

Since then, China Shenhua and Shaanxi Coal have risen by more than three times, China Coal Energy has risen by more than four times, and Yanzhou Coal Energy has surged even more—up by as much as five times. Recently, it has repeatedly refreshed historical highs. However, during this period, coal prices experienced a drop of 70% from their 2021 peak.

The big divergence between coal stocks rallying and coal prices falling is precisely the result of the market trading cycle positioning shifting toward value positioning. The pig industry’s anti-“involution,” similar to the coal industry’s “dual carbon” policy, is also expected to accelerate the transformation of the valuation framework for the hog sector.

Now, Muyuan is more like China Shenhua in 2020—its capital expenditure trend is declining, free cash flow thickens, dividend payout ratios rise, and the risk-free rate of return declines, leading to a lower cost of equity. As a result, the current value discounted back is trending upward.

▲Muyuan’s fixed capital expenditure declining gradually, source: Wind

Over the past few years, coal-related sectors including China Shenhua have completed valuation reversion. One important premise is that the market style has shifted toward valuing value assets with high dividend yields. Today, for the return of the hog industry—including Muyuan—the market style environment may also be required to cooperate similarly.

Currently, growth assets led by technology have already experienced a two-year trend rally and are at relatively high valuation levels over many years. Meanwhile, value assets led by consumption and dividends are at relatively low levels in recent years. Since March, with tensions in the Middle East heating up and liquidity tightening, it may accelerate a shift in the broader market from growth style toward value style.

In short, Muyuan’s core livestock farming business, backed by cost advantages, has repeatedly gone through cycles; its slaughtering business has also become a second growth pole, driving the company’s dazzling transition from cyclical to value, and its path of high-quality development will continue to broaden.

Disclaimer

This article contains information related to listed companies. It represents the author’s personal analysis and judgments based on disclosures made by listed companies according to their legal obligations (including but not limited to temporary announcements, periodic reports, and official interaction platforms, etc.). The information or opinions in the article do not constitute any investment advice or other commercial recommendations. Market Value Observer will not bear any responsibility for any actions taken as a result of adopting this article.

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