Stock Analysis & Valuation Jiangsu Lihua Animal Husbandry Co., Ltd. (300761.SZ)

• Previous Close: $20.11
• Sector Valuation Confidence Level: Low

Valuation method	Value, $	Upside, %
Artificial intelligence (AI)	22.74	13
Intrinsic value (DCF)	9.05	-55
Graham-Dodd Method	14.53	-28
Graham Formula	42.01	109

Strategic Investment Analysis

Company Overview

Jiangsu Lihua Animal Husbandry Co., Ltd. (300761.SZ) is a leading integrated livestock enterprise based in Changzhou, China, with operations spanning chicken, pig, and goose farming alongside food processing. Founded in 1997, the company has established a vertically integrated business model that controls the entire production chain from breeding and farming to processing and distribution. Specializing in grass chicken farming, Lihua Animal Husbandry serves China's massive consumer defensive sector, providing essential protein sources to the domestic market. The company's strategic positioning in Jiangsu province, one of China's most economically developed regions, provides access to substantial consumer markets and logistical advantages. As a publicly traded entity on the Shenzhen Stock Exchange, Lihua represents a key player in China's agricultural modernization efforts, combining traditional farming practices with modern operational efficiencies to meet growing domestic demand for quality animal proteins.

Investment Summary

Jiangsu Lihua Animal Husbandry presents a compelling investment case with strong profitability metrics, including net income of CNY 1.52 billion on revenue of CNY 17.72 billion, translating to a healthy net margin of approximately 8.6%. The company demonstrates solid operational efficiency with operating cash flow of CNY 2.41 billion significantly exceeding capital expenditures of CNY 1.69 billion. With a beta of 0.603, the stock exhibits lower volatility than the broader market, appealing to risk-averse investors in the consumer defensive sector. However, investors should monitor the company's debt levels (CNY 2.16 billion total debt against CNY 183 million cash) and exposure to commodity price fluctuations in animal feed costs. The generous dividend yield supported by CNY 0.60 per share distribution adds income appeal, while the company's established market position in China's protein sector provides defensive characteristics.

Competitive Analysis

Jiangsu Lihua Animal Husbandry competes in China's highly fragmented animal protein market, where scale, vertical integration, and regional presence determine competitive advantage. The company's primary strength lies in its specialized focus on grass chicken farming, a premium segment within China's poultry market that commands higher margins than conventional broiler chicken production. This niche positioning differentiates Lihua from mass-market poultry producers and provides some insulation from commodity price cycles. The company's vertical integration model, encompassing breeding, farming, and processing, creates cost controls and quality assurance throughout the value chain. However, Lihua faces intense competition from larger national players with greater financial resources and broader geographic reach. The company's regional concentration in Jiangsu province, while providing logistical advantages, also represents a concentration risk compared to competitors with nationwide operations. Competitive pressures include rising feed costs, disease management challenges, and evolving consumer preferences for food safety and traceability. Lihua's moderate scale (CNY 17.7 billion revenue) positions it as a significant regional player but limits its bargaining power compared to industry giants in procurement and distribution.

Major Competitors

• Muyuan Foods Co., Ltd. (002714.SZ): Muyuan Foods is China's largest pig farming enterprise with massive scale and vertical integration. The company's strengths include advanced breeding technology, cost leadership, and nationwide distribution network. However, Muyuan's primary focus on pork creates different market dynamics compared to Lihua's poultry specialization. While Muyuan has greater financial scale, it faces different commodity cycle exposures in the pork market.
• New Hope Liuhe Co., Ltd. (000876.SZ): New Hope Liuhe is a diversified agribusiness giant with operations in animal feed, poultry, and pork production. The company's strengths include massive scale, integrated feed production, and strong brand recognition. New Hope's broader product portfolio and national presence provide competitive advantages, though its diversification may dilute focus compared to Lihua's specialized poultry operations.
• Haid Group Co., Ltd. (002311.SZ): Haid Group is primarily an animal feed manufacturer with expanding livestock operations. The company's core strength lies in feed production technology and distribution networks. While Haid has smaller livestock operations compared to Lihua, its feed business provides upstream integration advantages. However, Haid's livestock segment is less developed than Lihua's established poultry operations.
• Wens Foodstuff Group Co., Ltd. (002458.SZ): Wens Foodstuff is one of China's largest integrated poultry and livestock producers with significant scale advantages. The company's strengths include comprehensive vertical integration, breeding technology, and market leadership in specific poultry segments. Wens' larger scale provides cost advantages but also exposes it to greater volatility during industry downturns compared to Lihua's more focused regional approach.
• Guangdong Wens Dahuanong Biotechnology Co., Ltd. (002100.SZ): As part of the Wens group, Dahuanong focuses on animal health products and feed additives. The company's specialization in animal pharmaceuticals and nutrition provides complementary services to livestock producers. While not a direct producer competitor, Dahuanong represents competition in the supporting industries that affect Lihua's operational costs and animal health management.