As rising pig prices dragged down gross profit margins, Yurun's report and core losses for the first half of 2015 increased to HK$724 million and HK$675 million respectively. In the first half of 2015, the slaughter volume of designated pig slaughter companies larger than China fell 10.3% year on year, and fell 18.2% year on year in July. Year to date, pig and pork prices in China have increased 13.1% and 7.1%, respectively. Expectations that the narrowing of pig and pork price spreads will have a negative impact on the gross margin of the company's upstream business.

Yurun hopes to record a 3.7% increase in pig slaughter and a 9.9% increase in sales of deep-processed meat products in the second half of 2015. Benefiting from product price increases, the company also expects the gross margin of frozen meat, low-temperature meat products and high-temperature meat products to improve month-on-month in the second half of 2015. However, chilled meat profit margins may still be under pressure. As slaughter volume and sales growth are expected to only slowly recover, gross margin is only slightly improved, rigid operating expenses, and rising net interest expenses, we believe the company will remain in a state of loss in 2015-2017.

Yurun's plant is valuable to its peers, but the company had a net debt of HK$7.5 billion in the first half of 2015 and is expected to continue to rise. We used Yurun's capital expenditure to re-estimate the value of the Yurun plant and gave a 10% discount. The new target price was HK$2.50, and the investment rating was “neutral.” Yurun needs a white samurai to help the company get out of the dark.