Muyuan Foods: Profits Soar While Sales Falter – A Market Paradox

A headline‑making surge in quarterly earnings masks a deeper structural crisis in pork sales. Despite reporting a record 147.79 billion CNY of net profit in the first nine months of 2025, Muyuan Foods Co. Ltd. is grappling with a stark decline in pork revenue that has already hit the 20 %+ drop in October alone. The company’s 111.79 billion CNY revenue in Q3 reflects a 22 % reduction from the same period last year, a trend that runs counter to the industry’s nominal revenue growth of 5.73 %.

1. The “Profit Paradox” – High Margins, Falling Sales

  • Profitability: Muyuan’s 17.92 % average gross margin (industry median 13.3 %) indicates efficient cost control, especially in a sector plagued by volatile feed prices.
  • Sales Decline: October sales revenue dropped 19.04 % YoY across the pork‑breeding sector; Muyuan’s individual decline exceeded 20 %. While the company recorded 708 million heads sold—the largest among peers—the revenue shortfall suggests a sharp fall in average selling price (down to the national average of 11.1 CNY/kg in September).

The company’s price‑earnings ratio of 12.07 remains attractive, but investors must weigh the looming risk of a price squeeze that could erode margins.

2. Capacity Management: A Double‑Edged Sword

The Agricultural Ministry’s 17‑19 November visit highlighted Muyuan’s compliance with national capacity‑control directives:

  • Reduction of breeding sows: From 3.62 million in January to 3.30 million in October (32.1 thousand sows cut).
  • Lowering slaughter weight: From 129 kg to 120 kg.
  • Halting new pig‑farm construction: 124 projects suspended, freeing up 12 million heads.

These measures, while prudent in stabilizing the market, limit growth. The company’s own revenue decline underscores that the industry’s excess capacity is being trimmed, but the price‑pressure remains severe.

3. ETF Exposure Amplifies Market Sentiment

  • Mid‑Cap ETF (159902): Muyuan’s share movement is mirrored in the fund’s performance. On 18 Nov, the ETF opened down 0.09 %, with Muyuan slipping 0.95 %. The next day, the fund rose 0.38 %, yet Muyuan remained flat at 0.00 %.
  • Animal‑Production ETF (159867): The index, which lists Muyuan among its top ten holdings, rose only 0.15 % on 19 Nov, reflecting investor caution amid industry uncertainty.

These fluctuations suggest that institutional sentiment is sensitive to the price‑squeeze narrative and the company’s ability to sustain margins.

4. Market Capitalization vs. Valuation

  • Market cap: 264 billion CNY (≈ 41 billion USD).
  • Close price (18 Nov): 48.45 CNY, a 9.8 % decline from the 52‑week high of 59.68 CNY.
  • P/E of 12.07 is modest relative to the consumer staples sector, yet the earnings‑growth narrative has been tempered by the price‑pressure reality.

5. Strategic Implications – What Should Investors Do?

  1. Demand‑Side Risks: Rising consumer preference for domestic protein and green products may support prices, but global market volatility (e.g., Japan’s nuclear fallout) still looms.
  2. Supply‑Side Controls: Continued capacity cuts may eventually stabilize prices, but short‑term revenue erosion is inevitable.
  3. Operational Efficiency: Muyuan’s high margins hint at potential for cost optimisation—yet the company must avoid over‑cutting production that could trigger a supply shortfall and inflate prices.

The paradox is clear: profitable now, but potentially vulnerable. If the price‑squeeze persists, even robust profitability may not sustain the valuation, and the market may reassess the company’s growth prospects.

6. Bottom Line – A Cautionary Tale of Growth vs. Sustainability

Muyuan Foods showcases the classic tension in commodity‑based business models: high profitability coupled with declining revenue. While the company demonstrates strong operational discipline and strategic alignment with national policy, the market’s focus on price dynamics cannot be ignored. Investors should scrutinise whether the current valuation reflects a transient profit surge or a sustainable competitive moat in a tightening pork market.

This analysis synthesises the latest financial disclosures and market events to highlight the inherent contradictions in Muyuan Foods’ performance. It is intended for informed investors who seek to understand the nuanced dynamics of the pork industry and the strategic implications for stakeholders.