Since Jingji Zhinong transformed its pig breeding business, costs have continued to be optimized, gradually creating high-quality production capacity for the industry. We have summarized two main points: one is to respect talents, build a luxurious and professional team, and give full trust and industry-leading rewards, and share the company's growth with them, thereby stimulating the team's subjective activism; the second is to pursue advanced productivity. Its industrialized building farming model achieves high efficiency and high controllability, and does not blindly seek speed in the expansion process. We always use continuous optimization of production performance as a yardstick to build our own high-quality production capacity rather than acquisition. Focus on the Greater Bay Area rather than the national layout, and complete the replication of the benchmark model Gaozhou project within the circle of competencies.

Breeding performance has continued to improve, and equity incentives have demonstrated determination and confidence in cost optimization. Since 2021, the company has maintained a relatively rapid growth rate in production volume while achieving a steady decline in costs. Especially since the beginning of 2023, the company's fattening pig production cost has dropped from 17.2 yuan/kg to 15.8 yuan/kg in August, which is already at an excellent level in the industry. In September 2023, Jingji Zhinong released the 2023 Restricted Stock Incentive Plan (draft). It is worth noting that it also uses the production cost target as an unlocking condition, demonstrating its determination and confidence to continue optimizing future costs. According to the unlocking conditions in the draft equity incentive plan, the growth rate of the company's pig listing in 2023 is not less than 45% or the production cost is not higher than 15.90 yuan/kg; the growth rate of the company's pig listing in 2024 (based on pig sales in 2022) is not less than 120% or the production cost is not higher than 14.98 yuan/kg. We believe that the company's farming performance is expected to continue to improve, gradually creating high-quality production capacity in the industry.

Building a luxurious professional farming team, giving high trust and full motivation to Jingji Zhinong as a rising star, finding top experts in the industry, allowing professionals to do professional work, and giving the industry a first-class level of return, we believe that the cohesion of the enterprise in talents and the performance of the talent ability of the enterprise is directly proportional to the enterprise's investment in talents. In 2019, the company invited Professor Zhang Guihong as the director of the Technical Research Institute, and appointed Dr. Yan Zhichun and others as expert consultants. In 2021, Wu Zhijun was officially hired as the head of the aquaculture business. Mr. Wu was responsible for pig breeding in Guangxi farming. He has been engaged in pig farming at the grassroots level for about 40 years now, with a high level of professionalism and strong practical ability. Looking at the horizontal comparison of the incentives given to the heads of breeding business by listed pig breeding companies, among professional managers, Jingji Zhinong gave Wu Zhijun first-class remuneration treatment in the industry and top internal equity incentives. Excluding the original majority shareholders of the company and the personnel involved in the actual controller, comparing the remuneration of professional managers responsible for the breeding business in pig breeding enterprises (2022 Annual Report), only Li Yanpeng (Muyuan Co., Ltd.) and Tao Yuling (New Hope) had higher remuneration than Wu Zhijun. In addition to the remuneration incentives for Wu Zhijun, this equity incentive granted Wu Zhijun the amount of shares in Dingge (same as President Bagan), and the coverage of the company's mid-level cadres, focused on the pig breeding business project company general manager, production site manager, branch manager, etc., and established a long-term incentive mechanism for the core breeding team, fully mobilizing the subjective activism of the company's core breeding team.

Construct a high-efficiency and highly controllable industrialization model. Standardized replication The benchmark company's industrialized building farming model has high efficiency and high controllability. The Gaozhou project is its model project. There is no shortage of benchmark projects in breeding enterprises. The key is to optimize production performance during the replication process. The solution proposed by Jingji Zhinong is to focus on one model and one region to complete standardized reproduction within a circle of competencies. The industrialized method of building farming has greatly improved manpower efficiency. For every 10,000 heads, Jingji Zhinong has 7 people, and Muyuan and New Hope have 10 and 9 people. Building farming density is high, and the spread of the epidemic is the biggest challenge. The company uses a “three-dimensional settlement” model integrating breeding and fattening, and achieves high controllability through a highly closed biosafety prevention and control system.

The Gaozhou project has taken full advantage of the high efficiency and high controllability of the building maintenance model, leading the industry in cost (production cost reached 14.6 yuan/kg in August 2023). The company adheres to building its own high-quality production capacity to replicate the Gaozhou model, rather than rapidly expanding through acquisitions. Volume growth maintains a reasonable pace at which production capacity is released, and focuses on the Greater Bay Area. Under the leadership of the Gaozhou project, the results of Xu Wen and Hezhou projects continued to be optimized.

Risk warning

1. A major epidemic has occurred in the pig breeding industry;

2. Demand for pork declined markedly in the short term.