YILI(SH:600887) HTSC·2026-02-03 06:19Investment Rating - The report maintains a "Buy" rating for the company with a target price of RMB 36.60, up from the previous target of RMB 34.38, reflecting an increase in the comparable company's PE average for 2026 [8][6]. Core Insights - The company has established itself as a leading player in the dairy industry through decades of focused development, creating strong barriers in product, supply chain, channel, and marketing [2][16]. - The short-term outlook for liquid milk demand is expected to improve, with a potential recovery in profitability driven by reduced competition. In the medium to long term, the company aims to expand its full dairy product range, focusing on adult nutrition and deep processing of dairy products as new growth engines [1][19]. - The company has a robust competitive advantage, having successfully developed several billion-yuan products and maintained a high-efficiency supply chain [2][16]. Summary by Sections Historical Development - The company has evolved from a small cooperative established in 1956 to the largest dairy enterprise in China, consistently ranking among the top five globally since 2014 [22][16]. - The company has navigated various industry phases, including a focus on high-margin products and strategic diversification into multiple dairy segments [24][23]. Revenue Outlook - The company is expected to see a gradual recovery in its liquid milk business, with high-end and functional products presenting structural opportunities. The adult nutrition segment is projected to grow significantly, with a forecasted revenue increase of over 23% in the health food sector by 2025-2030 [3][18]. - The deep processing of dairy products is anticipated to benefit from improved domestic R&D capabilities, with a target of achieving RMB 10 billion in revenue from this segment within five years [3][19]. Profitability Insights - The report suggests that the company's profitability is likely to improve, with a stabilization in milk prices expected in 2026. The competitive landscape is anticipated to shift towards more rational collaboration among leading dairy companies, enhancing overall industry stability [4][19]. - The company aims to achieve a profit margin of 5%-10% in its deep processing business, which is expected to contribute positively to overall profitability without dragging down the company's margins [4][19]. Dividend Policy - The company plans to maintain a dividend payout ratio of no less than 75% of its net profit for the years 2025-2027, reinforcing its commitment to shareholder returns [20][19]. Market Perspective - The report contrasts its optimistic view with some market skepticism regarding the dairy industry's growth potential, asserting that the company’s multi-dimensional advantages will allow it to continue expanding its growth boundaries [5][21].