乳业：周期之中辨趋势

Industry Investment Rating - The report maintains a "Recommend" rating for the dairy industry, indicating a positive outlook despite cyclical challenges [1] Core Views - The dairy industry is experiencing a reversal of its downturn, with profitability improving beyond expectations in 24Q3 [1] - The industry is expected to see supply-side clearance followed by demand recovery, with a potential reversal in the raw milk cycle by 25Q3 [1] - The report highlights the importance of the supply-demand gap in raw milk as a key indicator for price trends, with the gap narrowing and supply expected to be the main driver of future price changes [1][6] - Despite recent challenges, the long-term logic of the industry remains intact, with room for growth in both volume and price [1][7] Raw Milk Cycle Analysis - The raw milk cycle has been in a downturn for three years, with prices falling nearly 30% since October 2021, leading to widespread industry losses [1][6] - The report predicts a reversal in the raw milk cycle by 25Q3, driven by accelerated destocking after the Spring Festival and a potential rebound in raw milk prices [1][6] - The industry is currently in a phase of destocking, with herd numbers peaking in February 2024 and gradually declining, though the pace of destocking has been moderate due to policy support and reduced feed costs [1][6] Demand Outlook - Despite a slowdown in sales growth due to pandemic-related factors and weakened consumer purchasing power, sales volume has remained stable over the past two years [1][6] - Price declines, driven by oversupply and increased promotional activities, have been the main drag on industry scale [1][6] - The penetration rate of dairy products has increased despite external pressures, and the industry is expected to return to an upward trajectory as the economy recovers and raw milk prices rise [1][6] Dairy Company Strategies - Leading dairy companies are strengthening their control over upstream supply chains, with smaller suppliers facing greater pressure to maintain long-term relationships with major players [1][6] - Companies are accelerating their deep-processing layouts and expanding into B2B businesses to smooth out long-term operational cycles [1][6] - The report highlights the potential for B2B businesses to contribute significantly to revenue, with examples such as Fonterra Greater China achieving nearly RMB 30 billion in revenue and a net profit margin of around 10% [1][6] Investment Recommendations - The report recommends a bundled investment strategy focusing on leading companies like Yili and Mengniu, while also suggesting attention to smaller dairy companies and leading dairy farms for potential recovery elasticity [1][7] - The industry is seen as having strong configuration value, with potential for both earnings and valuation growth as the raw milk cycle reverses and demand recovers [1][7]