Lower costs will stimulate production capacity in pig farming, which in turn will lead to pig supply. Starting in 2013, the Ministry of Finance will increase insurance premiums for pig farming. Specifically, the Ministry of Finance will increase the original 10% premium subsidy to 40%-50% by region, and at the same time stipulate that the Ministry of Local Finance shall not subsidize less than 30%. The pig farming insurance will cover the direct death of fattening pigs due to natural disasters, serious diseases, and accidents. We anticipate that the new supplement will 1) drastically reduce the cost and risk of raising pigs, especially large-scale farms such as Yurun Group; 2) Small-scale aquaculture farms will purchase insurance to expand the scale of farming due to cost reduction, thus increasing the supply of upstream pigs and benefiting Yuyun food. The slaughter volume reached 30 million heads in the 2015 fiscal year. Our forecast is based on the parent company's aquaculture production capacity of 10 million heads in the first half of 2015 and the annual procurement volume of 5 million heads under the framework of related transactions with the parent company. As a result, the slaughter volume of Yurun in 20105 will be approximately 33 million heads. Management's expectation that the 2015 slaughter capacity utilization rate will reach 60% also supports our point of view. The slaughter production volume of 30 million heads corresponds to the compound growth rate of slaughter volume of 30% in the 13-15 fiscal year. Furthermore, capacity utilization will gradually increase as scale effects increase, and we expect gross profit to return to at least FY11 levels. If the company continues to execute its expansion plans, a high compound growth rate and revaluation can be expected. Valuation and target price: We maintain our point of view as the current double bottom of valuation and profit for long-term investors. Although HK$681 million will be lost in 2012, based on the slaughter volume of 697 million heads in the second half of 2012 (up 6% year on year) and 13.61 million heads for the whole year (down 11% year on year), we believe that the profit margin will shrink in the second half of 2012, and the company will turn profit in the first half of '13, based on a 20% increase in slaughter volume in '13 and a return to the 11-year level of gross profit in the first half of '13. We maintain our bullish rating and earnings per share forecast of HK$0.18/0.41/0.63. We maintain our Overstock Rating. The company's current stock price corresponds to a price-earnings ratio of 14 times in '13 and 0.7 times a net price-earnings ratio of 0.7 times in '13. The risk of poor profit in '12 and corporate governance is already reflected in the stock price. The long-term integration of pig farming and slaughtering industries is the government's focus, and we expect more support policies to be introduced in the future. Key hypotheses: 1) The average pig price rose 5% in fiscal year 13; 2) the slaughter volume growth rate increased to 20%, gross margin rebounded to 7.3% in '13 (8.6% in '11), and other income fell 50% year over year as production capacity expansion slowed. Stock price catalysts: The space for revaluation will come from a continuous increase in slaughter volume and recovery in gross profit. Other positive catalysts include stabilizing pig prices under sufficient supply, further increases in holdings by management and major shareholders, and control of slaughter licenses. Risks: The pace of recovery is slow, pig prices are rising rapidly, and corporate governance issues.