中国宠物食品(A)：转型为宠物食品领军企业，双引擎驱动增长；首次给予“买入”评级

Evolution into pet food leading player withdual-engine growth; our new Buy Initiating Coverage: BUY | PO: 66.00 CNY | Price: 49.93 CNY Initiate Buy rating on China Pet Foods with PO of RMB66 29 January 2026 Weinitiate on China Pet, a leading player in China’s pet food industry, at Buy with PO ofRMB66(32% upside). The company is evolving from a well-established OEM leader intoadual-engine driven pet food name with rising self-brand. We see a solid 3-year revenueCAGRof >20% with improving margin profile, driven by both self-brand penetration andoverseas capacity ramp-up. Our estimations for revenue/NPAT growth CAGR are23%/25% during 24-27E, which is MSD% above VA consensus on higher topline growth EquityAlice Ma>>Research AnalystMerrill Lynch (Hong Kong)+852 3508 8752 Chen Luo, CFA>>Research AnalystMerrillLynch (Hong Kong)+852 3508 2009 Self-brand: Swiftly gaining ground as a fast follower We believe the company is positioned to catch up in China’s fast-growing pet foodmarket, supported by rising pet ownership, higher per‑capita spending, and increasingdemand for diversified and premiumproducts among younger consumers. Thoughcompetition remains intense, the company’s smaller scale implies lower direct pressureand meaningful room for market share gains. Its established export track record and OEM: Resilient trend supported by overseas capacity We viewthe OEM segment as a resilient earnings buffer, driven by overseas capacityexpansion and solid order visibility. As an early mover in establishing overseas plants, thecompany benefits from proven localized production for global customers. With fullylocalized supply already in place for the US, the business is insulated from US–China Valuation and risks Our PO is derived from a 50/50 blend of DCF and P/E. We apply 30x 2026E P/E for ourP/E-based valuation, which is 12% lower than its historical average given sector de-rating pressure,and implies 1.2x PEG (vs global pet food peers’2.4x). Risks are rawmaterial prices, competition, food safety, tariff, and FX. VA: visible alpha >> Employed by a non-US affiliate of BofAS and is not registered/qualified as a research analystunder the FINRA rules. Refer to "Other Important Disclosures" forinformation on certain BofA Securities entities that takeresponsibility for the information herein in particular jurisdictions. BofA Securities does and seeks to do business with issuers covered in its researchreports. As a result, investors should be aware that the firm may have a conflict ofinterest that could affect the objectivity of this report. Investors should consider thisreport as only a single factor in making their investment decision. Refer to important disclosures on page46 to 48. Analyst Certification on page 42. PriceObjective Basis/Risk on page42.12925912 iQprofileSMChina Pet Foods (A) Company SectorFood Producers Company Description Founded in 1998, China Pet Foods is the leading pet foodmanufacturer in mainland China, supplying clients in US,Japan, EU, and >70 countries and regions. The companynow operates 22 production facilities worldwide, producingdry foods, wet foods, treats, and dietary supplements with>1,000 SKUs. It has self-owned brands "Wanpy", "ZEAL" and Investment Rationale We assign a Buy rating to China Pet Foods, given risingmarket needs, self-owned brands expansion and globalcapacity growth. Rising numbers of pets and newconsumption trends create more market space andbenefitsChina Pet Foods which has multiple price ranges Stock Data Price to Book Value 5.7x Contents P/E-based valuation: RMB62.85DCF-based valuation: RMB69.27 Fluffy power: Unpacking China’s emerging pet food market8 Pet foods in China: Rising market needs with low penetration8OEM business: Solid growth driven by global demand19Peers comparison20 Pioneer in pet food production with rising self-brand21 OEM business: solid foundation on manufacturing21Self-brand: leveraging new consumption trend26 Financials estimates32 Estimates overview32Dual-engine to drive topline growth33Steady margin improvement towards 202734Cash flow36 Financials41 Company at a glance Founded in 1998, China Pet Foods is the leading pet food manufacturer in mainlandChina, supplying clients in US, Japan, EU, and >70 countries and regions. The companynow operattes 22 production facilities worldwide (14 in China and 8 overseas),producing dry foods, wet foods, treats, and dietary supplements. China Pet Foods is also Moreover, the company started to develop its self-brand Wanpy since 1999, and formedsolid self-brand matrix including Wanpy, ZEAL, and Toptrees. As of 2024, Wanpy took2.8% market share and ranked #3 in China pet food market, with major focus on mid- to Valuation Our PO for China Pet Foods is RMB66, derived from a 50/50 blend of P/E and DCFvaluations. The 50/50 blend of P/E and DCF is in line with the valuation methodology forour coverage universe. We believe the P/E valuation could capture short-termmomentum, while DCF can