Investment Rating - The report rates the food and beverage industry as "Overweight" [1] Core Insights - The dairy price is expected to stabilize in the second half of 2025 after a prolonged adjustment cycle lasting over three years, with over 80% of the industry facing losses [6][60] - The report highlights the cyclical nature of raw milk prices influenced by production capacity, demand, and imports, with significant historical fluctuations noted [6][19] - The report emphasizes the correlation between raw milk prices and the stock prices of upstream dairy companies, suggesting that stock prices may react ahead of milk prices during cyclical changes [6][35] Summary by Sections 1. Raw Milk Price Cycle - The raw milk price is influenced by multiple factors including production capacity, demand, and imports, creating a cyclical pattern [6][19] - The dairy industry is characterized by a long breeding cycle for dairy cows, leading to delayed responses in production capacity adjustments [18][19] - Historical data shows three downward cycles and two upward cycles in raw milk prices since 2008, with significant events impacting demand and prices [19][26] 2. 2025 Outlook - The industry is currently facing severe losses, with a continued trend of dairy cow capacity reduction expected [60][62] - Policy support is anticipated to improve dairy product demand, contributing to a gradual stabilization of milk prices in the latter half of 2025 [60][64] - The report forecasts that as the supply-demand balance improves, raw milk prices may stabilize, benefiting upstream dairy companies [60][62] 3. Correlation Between Milk Prices and Dairy Company Stocks - The report notes a high correlation between raw milk prices and the stock prices of upstream dairy companies, indicating that stock prices may respond more quickly to changes in market conditions [6][35] - The performance of downstream dairy companies is also influenced by their product structure and market expectations, which can affect their stock prices during different price cycles [6][35] 4. Investment Recommendations - The report suggests focusing on leading dairy companies such as Modern Dairy and Yurun Dairy, as well as major dairy enterprises like Yili and New Dairy, which are expected to benefit from the stabilization of milk prices [6][60]

Group 1 - The core viewpoint is that the dairy price has stabilized at the bottom, with an inflection point expected soon, as indicated by the recent data from the Ministry of Agriculture and Rural Affairs showing the raw milk price at 3.07 CNY/kg, which has been fluctuating slightly for about 11 weeks [1] - Modern Dairy's data supports this, with a projected raw milk price of 3.61 CNY/kg in 2024, reflecting a year-on-year decrease of 10.4%, but the decline is narrowing, with a forecasted price of approximately 3.56 CNY/kg in the second half of 2024, indicating a low single-digit decline [1] - The industry is showing signs of a cyclical bottom, with a continuous reduction in the cattle supply, as evidenced by the monthly decrease of about 40,000 heads, leading to an expected cattle population of 5.8 to 5.9 million by the end of the year [1] Group 2 - Modern Dairy has demonstrated significant cost control effectiveness, with the cost of milk per kilogram dropping to 2.53 CNY, a year-on-year decrease of 13.4%, particularly in feed costs which fell by 16.7% to 1.95 CNY/kg [2] - The company is expected to see further reductions in feed costs, with a projected decrease of about 6.9% to 1.88 CNY/kg in the second half of 2024, while other costs remain stable at 0.58 CNY/kg [2] - This comprehensive cost optimization has resulted in an increase in the gross profit margin for raw milk business to 31.2%, up 2.8 percentage points year-on-year, showcasing the management's ability to control costs and maintain operational resilience [2] Group 3 - The industry is experiencing a significant Matthew effect, with the top 20 dairy companies increasing their milk production by 14.9% despite a 2.8% decline in national milk production in 2024 [3] - Modern Dairy's market share is increasing, with raw milk sales reaching 2.893 million tons in 2024, a year-on-year growth of 13.6%, and an expansion in the breeding scale to 491,000 heads, up 9% [3] - The company is expected to enter a dual growth cycle of volume and price increase once milk prices begin to rise [3] Group 4 - Revenue forecasts for Modern Dairy are projected at 14.44 billion CNY, 15.28 billion CNY, and 16.06 billion CNY for 2025-2027, with net profits of 310 million CNY, 750 million CNY, and 1.1 billion CNY respectively [3] - The estimated EPS for 2025-2027 is 0.04 CNY, 0.10 CNY, and 0.14 CNY, with a target price set at 1.3 HKD based on an increased valuation due to the anticipated industry reversal [3]

Core Viewpoint - Modern Dairy's Tangshan farm exemplifies the integration of technology and nature in dairy farming, showcasing advancements in livestock management and renewable energy utilization [1][5]. Group 1: Technological Advancements in Dairy Farming - The Tangshan farm features modernized cow housing equipped with advanced systems such as intelligent TMR feeding, self-sensing fans, precise spraying devices, estrus forecasting systems, and intelligent waste management [3]. - A smart system platform monitors the health status of each cow in real-time, ensuring optimal care and maximizing milk production through automated milking and quality control systems [3]. Group 2: Renewable Energy Integration - The farm has established a 39.8 MW centralized photovoltaic power station on the roofs of cow houses, utilizing a "full grid connection" model for sustainable green electricity supply [5]. - This innovative "photovoltaic + farm" system creates a synergistic relationship between energy production and agricultural practices, enhancing overall efficiency [5]. Group 3: Environmental Sustainability - The farm's circular system contributes to significant environmental benefits, including annual savings of over 10,000 tons of standard coal and reductions in carbon dioxide emissions by tens of thousands of tons, with an annual electricity generation exceeding 50 million kWh [6]. - The integration of photovoltaic panels and biogas projects establishes a closed-loop system that transforms waste into renewable energy, promoting a zero-carbon cycle [6]. Group 4: Commitment to Quality - During the Xiaoman season, the Tangshan farm leverages its expertise in breeding technology and quality management to create a scientifically sound, comfortable, and environmentally friendly growth environment for dairy cows, ensuring high-quality milk production [8].

Investment Rating - The report maintains an "OUTPERFORM" rating for China Modern Dairy [2][9][6] Core Views - The turning point for milk prices is approaching, with expectations for both volume and price increases [3][5] - The company has demonstrated significant cost control, leading to an industry-leading ability to reduce costs [4][13] - The industry is experiencing a pronounced Matthew effect, with the company gaining market share despite overall declines in milk production [5][14] Financial Summary - Revenue projections for China Modern Dairy are estimated at RMB 14.44 billion, RMB 15.28 billion, and RMB 16.06 billion for 2025, 2026, and 2027 respectively [6][15] - Net profit attributable to shareholders is expected to be RMB 310 million, RMB 750 million, and RMB 1.1 billion for the same years [6][15] - The company’s gross margin for raw milk business is projected to improve to 31.2% in 2024, reflecting effective cost management [4][13] Market Dynamics - The raw milk price has stabilized at RMB 3.07 per kilogram, indicating a bottom consolidation phase [3][11] - The cattle herd is decreasing at a rate of approximately 40,000 head per month, contributing to the anticipated rebound in milk prices [12][3] - The company’s raw milk sales reached 2.893 million tons in 2024, a 13.6% year-on-year increase, indicating strong performance against industry trends [5][14]

Investment Rating - The report maintains an "OUTPERFORM" rating for China Modern Dairy [2][9][6] Core Views - The turning point for milk prices is approaching, with expectations for both volume and price increases [3][5][14] - The company has demonstrated significant cost control, leading to an industry-leading ability to reduce costs [4][13] - The industry is experiencing a pronounced Matthew effect, with the company gaining market share despite overall declines in milk production [5][14] Financial Summary - Revenue projections for China Modern Dairy are as follows: 2025: 14.44 billion yuan, 2026: 15.28 billion yuan, 2027: 16.06 billion yuan [6][15] - Net profit attributable to shareholders is expected to be 310 million yuan in 2025, 750 million yuan in 2026, and 1.1 billion yuan in 2027 [6][15] - The gross margin for the raw milk business is projected to improve to 31.2% in 2024, up 2.8 percentage points year-on-year [4][13] Market Dynamics - The raw milk price has stabilized at 3.07 yuan per kilogram, indicating a bottom consolidation phase [3][11] - The cattle herd is decreasing at a rate of approximately 40,000 head per month, contributing to the anticipated rebound in milk prices [12][3] - The company’s raw milk sales reached 2.893 million tons in 2024, a 13.6% year-on-year increase, indicating strong performance against industry trends [5][14]

智通财经APP获悉，近日，全球知名评级机构标普全球正式发布了备受瞩目的《可持续发展年鉴(中国 版)2025》。现代牧业(01117)凭借在环境、社会及管治(ESG)领域的深度探索与卓越表现，连续第二年 入选这一国际性荣誉榜单，彰显了其在推动绿色发展和履行社会责任方面的领先实力与国际认可。 自2008年起，标普全球推出的《可持续发展年鉴》便以严谨的评估标准与专业评价体系，成为全球ESG 投资者及利益相关方衡量企业可持续发展水平的权威参考，其可持续发展评估(CSA)数据库被公认为行 业标杆。今年，标普全球将目光再度聚焦中国市场。现代牧业凭借对可持续发展战略的长期深耕与显著 实践，以绿色发展、社会价值创造及精细化治理的卓越成效，在1,600多家候选企业中成功突围并再次 入选年鉴，展现出中国乳业领军企业的可持续发展实力与竞争力。 根据标普全球CSA发布的现代牧业的ESG评估结果，现代牧业CSA分数达56分(ESG分数达57分)，较上 一年提升了30%，进步显著。不仅体现了现代牧业在可持续发展战略上的卓越布局，也彰显了其持续创 新和高效执行的能力。 现代牧业高度重视企业治理与可持续发展，构建覆盖全产业链的安全控制体系以 ...

Core Insights - The dairy industry is undergoing a green transformation as ESG principles penetrate the real economy, with significant progress in carbon emission disclosure and reduction practices among leading dairy companies [1][2][4] - Despite improvements, structural contradictions in full value chain carbon reduction remain prominent, particularly in the low coverage of Scope 3 emissions accounting and the lack of technical standards for packaging recycling and supply chain carbon management [1][4] - The challenge of converting high carbon reduction investments into brand premiums amidst fluctuating consumer demand has emerged as a new issue for dairy companies balancing sustainable development with operational efficiency [1][7] Carbon Emission Disclosure - The disclosure of ESG information among listed dairy companies has improved, with 9 H-share listed dairy companies having published ESG or sustainability reports [1][2] - Leading companies like Yili and Mengniu achieved the highest MSCI ESG ratings of AA in 2024, reflecting their progress in ESG practices and information disclosure [2][3] - A total of 11 A-share listed dairy companies disclosed their 2024 ESG reports, with several companies clearly reporting their greenhouse gas emissions [2][3] Carbon Reduction Practices - Notable carbon reduction achievements include New Dairy's "Zero Carbon Dairy" action plan, aiming for peak carbon emissions by 2030 and a 5% annual reduction in carbon intensity [2][3] - Yili has set a target to reduce carbon emissions intensity by 50% by 2030 compared to 2012 levels, achieving this goal ahead of schedule [3][4] - H-share listed companies generally perform better in carbon emission disclosure, with many providing detailed Scope 3 emissions data [3][5] Challenges in Full Value Chain Carbon Reduction - The low disclosure rate of Scope 3 emissions highlights the shortcomings in carbon reduction and accounting across the entire value chain [4][5] - The release of the first low-carbon evaluation technical standard for the dairy industry aims to address monitoring and accounting challenges faced by companies of different sizes [4][5] - Companies like Mengniu and Yili are actively working on comprehensive carbon accounting across their supply chains, with Yili having completed 47.2% of its carbon inventory for core suppliers by the end of 2024 [5][6] Brand Premium and Market Dynamics - The dairy industry faces operational challenges, with many companies experiencing revenue declines in 2024, prompting a need to convert ESG practices into product premiums [6][7] - Yili and Mengniu are integrating ESG achievements into their brand strategies, offering carbon-neutral products to enhance consumer engagement [7][8] - The market is not yet mature enough for consumers to prioritize ESG performance in their purchasing decisions, indicating a need for companies to enhance internal management and operational efficiency to realize long-term value from ESG investments [7][8]

Financial Performance - For the year ended December 31, 2024, the company reported revenue of RMB 13,254 million, a decrease of 1.5% compared to RMB 13,458 million in 2023[10]. - The company experienced a significant loss of RMB 1,469 million for the year, compared to a profit of RMB 185 million in 2023[10]. - The total cost of sales for the group was RMB 9,802.9 million, representing a year-on-year decrease of 5.1%[144]. - The gross profit for the raw milk business was RMB 3,257.2 million, an increase of 11.8% year-on-year, with a gross profit margin of 31.2%[154]. - The gross profit for integrated dairy farming solutions was RMB 194.3 million, a decrease of 9.6% year-on-year, with a gross profit margin of 6.9%[154]. - The Group's cash EBITDA increased by 19.6% year-on-year to RMB 2,985.8 million in 2024, with a cash EBITDA margin of 22.5%[177]. - The net cash inflow from operating activities decreased significantly to RMB 2,403.6 million, down RMB 3,045.4 million year-on-year from RMB 5,449.0 million in 2023[184]. Production and Sales - The total raw milk sold reached 289.3 thousand tons, representing a 13.6% increase from 254.7 thousand tons in 2023[10]. - Average annualized milk yield per milkable cow reached 12.8 tons, a year-on-year increase of 1.6%, with total raw milk production at 3.005 million tons, demonstrating a year-on-year increase of 16.1%[19]. - Total sales volume of raw milk increased by 13.6% year-over-year to approximately 2.893 million tons, compared to 2.547 million tons in 2023[140]. - Sales revenue from the raw milk business increased by 1.9% year-over-year to RMB 10,454.4 million, up from RMB 10,263.7 million in 2023[136]. - The average selling price (ASP) of raw milk decreased by 10.4% year-over-year to RMB 3.61/kg, down from RMB 4.03/kg in 2023[139]. Debt and Financing - The Group's debt-to-asset ratio increased to 67.2%, up 4.9 percentage points from the end of 2023, while the financing cost rate decreased to 3.40%[19]. - The total interest-bearing borrowings increased by 25.8% year-on-year to RMB 14,463.1 million, up from RMB 11,496.7 million in 2023[191]. - The net gearing ratio increased to 97.1% as of December 31, 2024, up from 74.4% in 2023, reflecting an increase in interest-bearing borrowings[179]. - The annual interest rate for bank borrowings ranged from 2.20% to 4.85% in 2024, compared to 1.50% to 8.16% in 2023[194]. Operational Efficiency and Cost Management - The company implemented cost-reduction and efficiency-enhancing measures, strengthening its core competitiveness amid a challenging market environment[17]. - The average unit cost of raw milk before inter-segment offset was RMB 2.53/kg, down RMB 0.39/kg from RMB 2.92/kg in the previous year[147]. - Selling and distribution costs increased by 17.8% year-on-year to RMB 445.1 million in 2024, up from RMB 377.8 million in 2023, mainly due to higher raw milk sales volume[166]. - Administrative expenses decreased by 10.1% year-on-year to RMB 766.2 million in 2024 from RMB 852.4 million in 2023, reflecting cost reduction efforts[169]. Strategic Initiatives and Innovations - The company aims to be a global dairy farming leader by deploying the entire industry chain and focusing on digital intelligence and ecological practices[17]. - Modern Dairy's strategic direction includes leveraging digital intelligence to innovate across the entire industry chain[43]. - The Group has developed the "Modern No. 1" Genomic Germplasm "Chip," filling a gap in the domestic commercial dairy cows genomic germplasms market[20]. - The company launched its "Green Leadership 2030" vision and initiated the "65 555 11" plan, focusing on six key areas and five core business areas[64]. - The Group's intelligent digital platform, Yunyangniu, focuses on data integration for dairy cow management, improving breeding capabilities and supply chain accuracy[121]. Sustainability and Environmental Initiatives - The Group has established a green recycling industrial chain for sustainable development, including biogas power generation and fertilizer treatment[126]. - The Group aims to reduce unit carbon emissions by 7%, 15%, and 20% by the end of 2025, 2030, and 2035, respectively, using 2021 as the base year[133]. - The Group has been recognized for its green low-carbon initiatives, leading to the establishment of the "FRESH" strategy for sustainable development in the livestock industry[81]. - The company is dedicated to building a green and sustainable development ecosystem across the entire industry chain[41]. Market Conditions and Challenges - Domestic demand for dairy products decreased, leading to a 1.9% year-over-year decline in dairy product output, totaling 29.62 million tons[89]. - China's total raw milk output in 2024 was 40.79 million tons, a 2.8% year-over-year decrease, marking the first decline since 2018[89]. - The average annual prices of feed ingredients like corn and soybean meal decreased by 14.8% and 21.3% respectively, providing some relief to dairy farming costs[90].

Investment Rating - The report initiates coverage with a rating of "Buy" for the company [2][7]. Core Views - The company is expected to see a stabilization and potential recovery in milk prices in 2025, which could lead to improved performance [6][9]. - The company has a strong backing from major shareholders, including Mengniu Dairy, which holds a 56.36% stake, ensuring a stable demand for its raw milk business [6][18]. - The report highlights the cyclical nature of the company's profitability, heavily influenced by raw milk prices and feed costs [6][7]. Financial Data and Profit Forecast - Revenue projections for 2025-2027 are estimated at 13.33 billion, 13.69 billion, and 14.11 billion CNY, with year-on-year growth rates of 0.6%, 2.65%, and 3.06% respectively [5][7]. - The net profit for the same period is forecasted to be 252 million, 432 million, and 727 million CNY, indicating a turnaround from losses in 2024 [5][7]. - The earnings per share (EPS) is expected to improve from -0.179 CNY in 2024 to 0.032 CNY in 2025, and further to 0.092 CNY by 2027 [5][7]. Business Overview - The company primarily focuses on raw milk sales, with a significant portion of its revenue derived from long-term contracts with major clients like Mengniu and New Hope Dairy [6][26]. - The company has expanded its operations to 47 farms across 13 provinces, with a total of 491,200 dairy cows, of which 51.08% are mature cows [6][21]. - New business segments, including feed and breeding solutions, are being developed, contributing to revenue diversification [6][22]. Valuation and Market Comparison - The report employs a comparable company price-to-book (PB) valuation method, suggesting a target price of 1.26 HKD per share for the next year, representing a 12.4% upside from the current price [7][9]. - The average PB ratios for comparable companies are projected to be 0.95, 0.80, and 0.69 for 2025-2027 [7][9]. Key Assumptions - The report assumes a 2% and 0.5% year-on-year growth in raw milk sales volume for 2025 and 2026, respectively, with an average selling price (ASP) increase of -2% in 2025 and 1.5% in 2026 [8][9]. - The cost of raw milk is projected to be 2.51 CNY/kg in 2025, with feed costs contributing significantly to overall expenses [8][9].

Group 1 - The modern dairy farm in Baoji, Shaanxi Province, is a high-standard, specialized, and large-scale dairy cattle breeding base, recognized as a key leading enterprise in agricultural industrialization in the region [3] - The farm utilizes an intelligent breeding system that includes fully automated TMR feeding, manure cleaning, milking, and resource utilization of manure, leading to high breeding standards and quality control of raw milk [3] - The surrounding area is flourishing with kiwi and seedlings, benefiting from the promotion of biogas fertilizer application, which enhances soil fertility and crop growth [5] Group 2 - To facilitate the use of biogas fertilizer for local farmers, the modern dairy farm has constructed a liquid fertilizer return pipeline covering over 2,800 acres, providing tangible benefits and increased efficiency for nearby farmers [6] - The farm not only brings technology but also stimulates the economic vitality of surrounding villages, enabling local residents to find employment close to home and expand silage planting areas for additional income [8]