Pengdu Agriculture is set to be delisted from the Shenzhen Stock Exchange due to prolonged low stock prices. Despite efforts to stabilize its stock, judicial freezes on major shareholders’ holdings have compounded the issue. The company’s transformation from pig farming to a diversified international agribusiness under Shanghai Pengxin Group’s control includes significant investments in Yunnan’s cattle industry. Challenges, including political instability in Myanmar and pandemic restrictions, have delayed profits from its cross-border beef cattle project. Nevertheless, Pengdu remains focused on achieving profitability through diversified cattle sources and local integration.

Pengdu Agriculture and Animal Husbandry Co., Ltd. is facing imminent delisting from the Shenzhen Stock Exchange due to its stock price remaining below CNY 1.00 (about USD 0.14) for 20 consecutive trading days. The stock has been suspended from trading since July 3, 2024, and will be transferred to the National Equities Exchange and Quotations (NEEQ) within five trading days post-suspension, ensuring it can be traded within 45 days after delisting.

As of July 2, Pengdu Agriculture’s stock closed at CNY 0.36 (USD 0.05) per share. Over the previous nine trading days, the stock’s closing price deviation exceeded 50%, highlighting severe abnormal fluctuations.

Efforts to rescue the stock price were made: the controlling shareholder, Shanghai Pengxin (Group) Co., Ltd., and its concerted actors, who hold a combined 40.20% stake, planned to increase their holdings by 1-2% through centralized bidding within five months starting May 28, 2024. By June 24, they had increased their holdings by 1.56% (approximately 99.6 million shares), costing around CNY 94 million (about USD 13 million). However, on the same day as the suspension announcement, some of Pengxin Group’s shares in the company were judicially frozen, resulting in nearly half of their holdings (19.13% of Pengdu Agriculture’s total equity) being frozen.

Transformation into Diversified International Business

Pengdu Agriculture’s predecessor, Hunan Dakang Livestock Co., Ltd., was established in 1997, primarily engaged in pig farming and sales. It was listed on the Shenzhen Stock Exchange’s SME board in 2010. In 2014, Shanghai Pengxin Group became the controlling shareholder through a directed issuance and renamed the company Hunan Dakang International Agriculture Food Co., Ltd. (Dakang Agriculture) in 2016. In early 2021, it was renamed again to Pengdu Agriculture and Animal Husbandry Co., Ltd., and the company’s headquarters moved from Huaihua, Hunan to Changsha, with operational offices remaining in Shanghai.

Since Pengxin’s takeover, Pengdu Agriculture’s development strategy and main business have undergone significant changes. The company has clarified its strategic positioning of “agriculture + food” and its development concept of “global resources, Chinese market.” Through global mergers and acquisitions, it quickly gained control over agricultural and food resources, aligning them with the domestic market. The company’s main businesses currently include four sectors: agricultural materials and grain trade, beef cattle business, sheep meat business, and dairy.

The trade sector underpins Pengdu Agriculture’s revenue. In 2023, the company’s total revenue reached CNY 17.45 billion (about USD 2.43 billion), with bulk commodity trade contributing 96.52%, while sales from sheep, beef cattle, and dairy products accounted for 1.34%, 0.91%, and 0.77%, respectively.

Betting on Yunnan’s Cattle Industry

In 2023, Pengdu Agriculture’s beef cattle business revenue was CNY 158 million (about USD 22 million), more than doubling from the previous year but still far from its target. Since 2017, Pengdu Agriculture has invested over CNY 3 billion (about USD 417 million) in the China-Myanmar cross-border beef cattle integration project, establishing isolation farms and the largest beef cattle slaughter and processing plant in China with an annual capacity of 500,000 heads. However, the project has yet to generate benefits due to various factors.

The cross-border beef cattle project originated from a pilot program in 2017 in Yunnan, supported by the Chinese central government, to manage cross-border animal diseases in border areas and regulate the beef cattle import market. Pengdu Agriculture seized this opportunity, forming strategic partnerships with relevant pilot areas. Following several revisions to its financing plan, it raised nearly about CNY 1.60 billion (about USD 222 million) in 2020 for the China-Myanmar project. In addition to the slaughter and processing base in Ruili on the Chinese side, the project includes constructing a 500,000-head beef cattle breeding base in Myanmar.

However, political instability in Myanmar delayed the ranch construction. Since 2021, Pengdu Agriculture has reported building a 5,000-head and a 1,000-head feedlot, with two more 8,000-head feedlots under construction. The project’s implementation timeline has been repeatedly extended, now set for completion by May 2025.

Additionally, pandemic-related restrictions and foot-and-mouth disease bans have hindered live cattle imports from Myanmar, leaving the Ruili processing base underutilized. The company’s beef product revenue was just over CNY 500,000 (about USD 69,444) in 2022, rising to CNY 30 million (about USD 4.17 million) in 2023 with eased import restrictions.

Pengdu Agriculture has since adjusted its operations, seeking diversified cattle sources to mitigate risks. The company now imports quality cattle through traders and strengthens local cattle sourcing in Yunnan, aiming to achieve its profit targets.

Pengdu Agriculture once aimed to introduce 1.20 million high-quality breeding cows from overseas within five years, creating a local herd of 2.30 million and an annual output of 2 million heads. However, challenges persist. In June 2021, Pengdu Agriculture agreed to purchase approximately 200,000 imported breeding cows worth nearly CNY 3.40 billion (USD 473 million) from Beijing Xiongte Animal Husbandry Co., Ltd. The deal fell through after 91,700 heads, and 49,400 heads were returned due to delays in constructing government-led farms in Yunnan. The parties are still resolving a CNY 153 million (about USD 21 million) advance payment issue.

Currently, Pengdu Agriculture has established nine farms in Yunnan, housing around 50,000 Angus and Hereford cattle. These cattle are expected to reach the market later this year and next, potentially boosting profits as the industry recovers.

Pengdu Agriculture’s future hinges on the successful integration and profitability of its beef cattle business, particularly the China-Myanmar cross-border project. The company anticipates accelerated beef imports from Myanmar, providing a new profit stream. Chairman Tian Yi remains optimistic, emphasizing the importance of the beef cattle business for future profits.

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