Core Viewpoint - The launch of a new product, "Yogurt with Chewy Lemon," represents a novel category of light dairy juice beverages, aimed at promoting labor spirit and honoring workers in society [1][18]. Group 1: Product Launch and Promotion - The new product "Yogurt with Chewy Lemon" is being promoted through a public welfare distribution event titled "Celebrating Labor Day, Saluting Workers," held from May 1 to May 5 [1][14]. - The event aims to distribute 100,000 free packages of the new product, valued at 400,000 yuan, to citizens and tourists in Jinan, enhancing brand care and supporting cultural tourism consumption [3][16]. Group 2: Event Details - The main venue for the event is located at Qianfo Mountain, with additional venues at the Jinan Zoo and Fuhui Mountain, ensuring broad coverage of popular tourist spots [5][7]. - Participants can receive one free box of "Yogurt with Chewy Lemon" by scanning a QR code at the event, with staff available to guide and ensure orderly participation [7][16]. Group 3: Product Features and Innovation - The product features a unique "three-ingredient design" and a "whole fruit utilization" process, incorporating lemon peel, flesh, pomelo, and coconut particles to create a rich taste experience [9][11]. - The innovative production technique ensures that each bottle contains a balanced mix of fruit particles, enhancing the overall sensory experience for consumers [12]. Group 4: Social Responsibility and Community Engagement - The event emphasizes the integration of cultural tourism resources in Jinan, encouraging community interaction and honoring frontline workers such as sanitation workers and delivery personnel with priority access to the product [14][16]. - The company aims to convey its commitment to innovation and social responsibility through this initiative, reinforcing its consumer-centric business philosophy [18].

Investment Rating - The investment rating for the company is "Buy" [1] Core Views - The report highlights that the company achieved a revenue of 115.78 billion yuan in 2024, a year-on-year decrease of 8.24%, and a net profit attributable to shareholders of 8.45 billion yuan, down 18.94% year-on-year. The first quarter of 2025 showed a revenue increase of 1.35% year-on-year to 33.02 billion yuan, with a net profit of 4.87 billion yuan, down 17.71% year-on-year [2][4] - The company is expected to see a recovery in performance, driven by a rebound in demand for dairy products and cost reduction efforts. The projected earnings per share (EPS) for 2025-2027 are 1.67, 1.83, and 1.99 yuan, respectively, with corresponding price-to-earnings (P/E) ratios of 18X, 16X, and 15X [5] Financial Summary - In 2024, the company reported total revenue of 115.78 billion yuan, with a year-on-year growth rate of -8.24%. The net profit attributable to shareholders was 8.45 billion yuan, reflecting a year-on-year decline of 18.94%. The gross profit margin was 34.1% [6] - For 2025, the expected total revenue is 119.20 billion yuan, with a projected growth rate of 3.0%. The net profit is anticipated to be 10.64 billion yuan, representing a year-on-year increase of 25.9% [6] - The company plans to distribute dividends of 7.726 billion yuan in 2024, with a payout ratio of 91.4%, resulting in a dividend yield of 4.08% based on the latest closing price [4]

Core Viewpoint - The most challenging times for the dairy industry have passed, and there are emerging opportunities for structural upgrades within the industry [1] Industry Overview - The dairy industry faces severe challenges in 2024, including increased upstream raw milk production and insufficient downstream consumer demand, leading to pressure on company performance [2] - Despite a decline in revenue and net profit for the company, it remains the largest and most profitable dairy company in Asia, with a net profit of 11.539 billion yuan, a year-on-year increase of 12.2% after excluding goodwill impairment [3] Company Strategy - The company's management philosophy focuses on low inventory and stable pricing to maintain dealer confidence, addressing rising inventory and declining profitability among dealers [4] - The company aims for balanced development across all business segments to ensure sustainable growth, akin to the "wooden barrel effect" [6] Business Performance - The company maintains a leading market share in liquid milk and ice cream, with the milk powder segment reaching a record high of 29.675 billion yuan [8] - The company has seen double-digit growth in its infant formula brand and its B2B cheese business, as well as in overseas markets [8] Future Outlook - The company expresses confidence in the long-term development of the dairy industry, identifying opportunities in online sales growth, increased consumer spending in first-tier cities, and the upgrading of dairy consumption structures [10] - The company has set a revenue target of 119 billion yuan and a profit target of 12.6 billion yuan for the year, aiming for a net profit margin of 9% [14] - In the first quarter, the company achieved a revenue of 33.018 billion yuan, a year-on-year increase of 1.35%, and a net profit of 4.629 billion yuan, a year-on-year increase of 24.19% [14]

Investment Rating - The investment rating for Yili Co., Ltd. is "Buy" (maintained) [1] Core Views - The report indicates that Yili's performance in 2024 is expected to be impacted by a decline in revenue and net profit, but the first quarter of 2025 shows signs of improvement with better-than-expected results [7] - The company is focusing on cost advantages and optimizing product structure, leading to significant improvements in gross margin [7] - Yili's strategy emphasizes rational channel management and shareholder returns, with a notable increase in dividend payout ratio [7] Financial Performance Summary - For 2024, Yili is projected to achieve total revenue of 115.78 billion yuan, a year-on-year decrease of 8.24%, and a net profit of 8.45 billion yuan, down 19% [7] - In Q1 2025, the company expects total revenue of 33.02 billion yuan, a year-on-year increase of 1.4%, and a net profit of 4.87 billion yuan, down 17.7% [7] - The gross margin for 2024 and Q1 2025 is expected to improve, with increases of 1.3 and 1.88 percentage points respectively [7] Earnings Forecast and Valuation - The revenue forecast for 2025 is adjusted to 120.9 billion yuan, with a year-on-year growth of 4.43%, and for 2026, it is projected at 126.34 billion yuan, with a growth of 4.5% [7] - The net profit forecast for 2025 is revised to 11.11 billion yuan, reflecting a year-on-year increase of 31.48%, and for 2026, it is expected to be 12.13 billion yuan, with a growth of 9.18% [7] - The report maintains a price-to-earnings ratio (P/E) forecast of 17 for 2025, 16 for 2026, and 15 for 2027 [7]

Group 1 - Morgan Stanley's trading department has noted an increase in attention and trading activity in the Chinese dairy industry, influenced by government policies on infant formula and the industry's strong domestic characteristics [1] - Despite the anticipated poor performance in 2024, Yili's (600887.SH) 2025 performance guidance is reassuring, with sales, reported earnings, and recurring earnings expected to grow by 3.4%, 34%, and 80% year-on-year respectively [1] - The new target price for Yili is set at 35 RMB, up from 30 RMB, with an expected price-to-earnings ratio of 18 times for 2026, reaffirming it as the preferred stock in the Chinese dairy sector [1] Group 2 - Yili anticipates a reversal of the surplus in raw milk supply in the second half of 2025 due to reduced dairy farm capacity, rising beef prices accelerating farm closures, and ongoing trade wars pushing up feed costs [2] - This situation is viewed positively for the entire industry, leading to upgraded ratings for Mengniu (02319) and Feihe (06186) [2]

Core Viewpoint - The company reported a revenue decline of 7.07% year-on-year in Q4 2024, with net profit affected by asset impairment losses, leading to a significant increase in the dividend payout ratio to 91.4% for the year. The company aims for a positive outlook in 2025, targeting total revenue of 119 billion yuan and a profit of 12.6 billion yuan, representing year-on-year growth of 2.8% and 24.4% respectively, with an adjusted profit growth expectation of 16% after excluding impairment losses and asset sales [1][2][6]. Financial Performance - In Q4 2024, the company’s revenue was 26.74 billion yuan, with a net profit loss of 2.42 billion yuan primarily due to a one-time asset impairment loss of nearly 4 billion yuan. The cash collection for Q4 was 29.244 billion yuan, showing better performance than revenue, with a net operating cash flow of 7.870 billion yuan, up 19.6% year-on-year [2][4]. - For Q1 2025, the company reported revenue of 33.02 billion yuan, a year-on-year increase of 1.35%, while net profit decreased by 17.71% to 4.87 billion yuan. The adjusted net profit, however, increased by 24.19% to 4.63 billion yuan, indicating better-than-expected performance [5][6]. Product Category Performance - The liquid milk segment saw a revenue decline of 12.32% in 2024, with contributions from volume, price, and structure being -7.1%, -3.8%, and -1.1% respectively. In contrast, the milk powder and dairy products segment grew by 7.53%, driven by an 8.2% increase in volume [3]. - The cold drink segment reported a revenue increase of 11.7%, despite a significant volume decline of 18.3%, indicating a price increase [3]. Cost and Margin Analysis - The company’s gross margin improved to 33.9% in 2024, up 1.3 percentage points year-on-year, benefiting from a decrease in raw milk costs, with material costs per ton down by 8.27%. The gross margin for Q4 was 31.0%, down 0.74 percentage points year-on-year [4]. - The net profit margin for 2024 was 7.3%, down 1.0 percentage points year-on-year, impacted by a one-time goodwill impairment charge of 3 billion yuan related to Aoyou [4]. Industry Outlook - The dairy industry is expected to see an improvement in supply and demand dynamics, with upstream supply-side adjustments and enhanced policy expectations on the demand side. The company is positioned to benefit from these trends, aiming for above-expectation growth following the cleanup of its financial statements [6].

Core Viewpoint - The dairy giant Yili (600887.SH) has ended its 30-year growth streak due to unprecedented industry pressures, with significant declines in revenue and profit expected in 2024 [1][2]. Financial Performance - Yili's 2024 revenue is projected to be 115.78 billion yuan, a year-on-year decline of 8.24%, while net profit is expected to drop to 8.45 billion yuan, down 18.9% [2]. - In Q4, Yili made a substantial impairment provision of 5.2 billion yuan, resulting in a quarterly loss of 2.42 billion yuan, further pressuring annual profits [3]. Impairment and Asset Valuation - A major component of the impairment was a goodwill write-down of 3.04 billion yuan related to the acquisition of Ausnutria (1717.HK), which has seen a significant decline in performance [4]. - Other impairment provisions included 1.23 billion yuan for inventory and 370 million yuan for fixed assets due to market demand changes and technological obsolescence [5]. Industry Challenges - The dairy industry has faced negative retail growth since 2022, with a 2.7% decline in overall sales in 2024, exacerbating supply-demand imbalances [9][10]. - Yili's liquid milk segment saw a revenue drop of 12.3% in 2024, with a decrease in both sales volume and price [11]. Market Strategy - To protect distributor profits, Yili began channel inventory clearance in Q2 2024, leading to a significant revenue drop of 16.5% in Q2, which narrowed to 6.7% in Q3 [12][13]. - By Q3, Yili completed channel clean-up, stabilizing sales during peak seasons [14]. Future Outlook - Yili anticipates a potential turnaround in 2025, with Q1 revenue showing a slight increase of 1.35% and net profit rising by 24.19% [17]. - The company remains cautious about demand recovery, projecting only a 2.8% increase in full-year revenue for 2025 [18]. Market Share and Growth Engines - Yili's liquid milk revenue has stagnated, with a slight increase to 85.54 billion yuan in 2023, but its market share in this segment is declining [21][22]. - Conversely, the infant formula segment is experiencing growth, with a 7.53% increase in revenue to 29.675 billion yuan in 2024, driven by rising birth rates [26][29]. Diversification Efforts - Yili is exploring diversification beyond dairy, including launching new tea and mineral water products, while also focusing on functional dairy products [40][43]. - The company is also investing in health-related sectors and has established a venture capital fund targeting high-tech innovations in the health industry [48].

Core Insights - In the context of slowing growth in the dairy industry, leading companies are seeking new growth avenues, with Yili focusing on expanding its water business [2] - Yili has appointed Liu Yong, former Vice President of Cui Lin Agricultural Group and Chairman of Evergrande Ice Spring Group, as the Sales General Manager for its water beverage division [2] - Liu Yong brings nearly 10 years of experience in the beverage industry, having previously achieved significant revenue growth at Evergrande Ice Spring [2][3] Company Strategy - Yili's water beverage strategy is not new, dating back to 1996, but has been revitalized with a clearer focus on leveraging its strengths rather than merely following market trends [3] - The company is introducing differentiated products, such as the "tea-water separation fresh-keeping cap" technology for its iced tea and baby water products linked to its milk powder brand [3] Market Challenges - The bottled water market is dominated by three major players—Nongfu Spring, C'estbon, and Master Kong—who hold nearly 60% of the market share, making it challenging for new brands to penetrate [3] - Consumer loyalty to water sources and brand recognition poses a significant hurdle for Yili, necessitating substantial investment in market education [3] Future Outlook - The success of Yili's water beverage business as a new pillar will depend on its ability to continuously launch differentiated products and create synergies in channels and branding [3] - The management has high expectations for this segment, indicating potential for innovation and increased competition in the industry [3]

Core Viewpoint - Yili Group reported a robust financial performance for 2024, with total revenue reaching 115.78 billion yuan and a net profit of 11.54 billion yuan, marking a 12.2% increase, while the first quarter of 2025 showed continued growth in revenue and net profit [2][4] Financial Performance - In 2024, Yili achieved total revenue of 1157.80 billion yuan, with a net profit of 115.39 billion yuan after excluding goodwill impairment, reflecting a growth of 12.2% [2] - For Q1 2025, the company reported total revenue of 330.18 billion yuan, a year-on-year increase of 1.35%, and a net profit of 46.29 billion yuan, up 24.19% [2] - The gross profit margin improved by 131% to 34.03% in 2024, with operating cash flow net amount increasing by 18.86% to 21.74 billion yuan [2] Business Segmentation - Yili's business matrix is structured into three tiers: liquid milk and cold drinks, milk powder and cheese, and health drinks and overseas markets [3] - The liquid milk segment generated revenue of 750.03 billion yuan, maintaining the highest market share in ambient white milk, although it faced a 19.61% decline in revenue year-on-year [3] - The milk powder and dairy products segment saw revenue of 296.75 billion yuan, a growth of 7.53%, driven by strong performance in high-end products [3] - The overseas business, while showing growth in cold drinks and infant formula, still represents less than 10% of total revenue [3] Strategic Focus - For 2025, Yili plans to achieve total revenue of 1190 billion yuan and a profit of 12.6 billion yuan, representing increases of 2.8% and 24.4% respectively compared to 2024 [4] - The strategic focus for 2025 will be on functional nutrition and deep processing of dairy products [4] Challenges Ahead - The company faces challenges such as declining newborn numbers affecting infant formula demand and the need to cater to the aging population's nutritional needs [5] - Cost pressures from excess raw milk supply and competition from brands like Feihe and Junlebao may dilute Yili's market share [5] - Geopolitical and tariff risks could hinder the progress of Yili's globalization efforts [5]

Investment Rating - The report maintains a "Strong Buy" rating for the company [2][6] Core Views - The company aims to achieve a total revenue of 119 billion yuan and a total profit of 12.6 billion yuan in 2025, representing year-on-year growth of 2.8% and 24.4% respectively, with an expected profit growth of 16% after excluding one-time asset impairment losses [6][7] - In Q1 2025, the company reported revenue of 33.02 billion yuan, a year-on-year increase of 1.35%, and a net profit attributable to shareholders of 4.87 billion yuan, a decrease of 17.71% year-on-year, while the non-recurring net profit increased by 24.19% [6][7] - The dairy product industry is expected to improve due to accelerated supply-side adjustments and enhanced demand-side policies, indicating a positive trend in supply and demand [6][7] Financial Performance Summary - In 2024, the company experienced a revenue decline of 8.24% to 115.78 billion yuan, with a net profit of 8.45 billion yuan, down 18.94% [5][7] - The company’s gross margin for 2024 was 33.9%, an increase of 1.3 percentage points year-on-year, benefiting from a decrease in raw milk costs [5][6] - The company’s cash dividend for 2024 was 7.726 billion yuan, with a payout ratio of 91.4%, significantly higher than previous years [5][6] Segment Performance - In 2024, liquid milk revenue decreased by 12.32% to 75 billion yuan, while infant formula and dairy products saw a revenue increase of 7.53% to 29.675 billion yuan [5][6] - The cold drink segment reported a revenue increase of 11.7% to 10.69 billion yuan, despite a decline in sales volume [5][6] Future Outlook - The company forecasts an EPS of 1.79 yuan for 2025, with a target valuation of 20 times earnings, leading to a market capitalization estimate of 227.8 billion yuan [6][7] - The report indicates that the company is well-positioned for potential growth following the cleanup of its balance sheet from one-time asset impairments [6][7]