Group 1 - Dairy stocks continue to show strong performance, with China Shengmu (01432) up 9.09% to HKD 0.48, Yurun Dairy (09858) up 3.53% to HKD 4.4, Mengniu Dairy (02319) up 1.46% to HKD 16.67, and Ausnutria (01717) up 1.19% to HKD 2.55 [1] - The implementation plan for the childcare subsidy system was released on July 28, which will provide a subsidy of HKD 3,600 per child per year for children under three years old starting from January 1, 2025, benefiting over 20 million families [1] - The policy is expected to directly boost the consumption of dairy products, particularly infant formula [1] Group 2 - Guosen Securities is optimistic about the reversal of the beef cycle in 2025, predicting that meat prices will continue to rise until 2027 [1] - The domestic raw milk supply and demand situation is expected to improve in the second half of 2025, leading to a potential price recovery [1] - The improvement in raw milk prices is favorable for the profitability of dairy farming, and the upward trend in the beef cycle is expected to significantly enhance the income from culling dairy cows and selling calves, recommending Yurun Dairy, Modern Dairy, and China Shengmu for their high performance recovery potential [1]

Investment Rating - The industry investment rating is "Outperform the Market" (maintained) [2][6] Core Viewpoints - The report anticipates a turning point in the beef cycle in 2025, with a continued rise in meat prices expected until 2027, driven by supply adjustments and improved market conditions [4][16] - The domestic beef and milk prices have diverged, with the beef-to-milk price ratio reaching a historical high of 20.97, indicating potential for accelerated dairy cow culling and a subsequent recovery in raw milk prices [3][20] - The report highlights that the domestic beef market is expected to tighten due to reduced supply and import pressures, leading to a sustained upward trend in beef prices [11][16] Summary by Sections Beef Market Outlook - The report projects that the beef market will experience a significant recovery starting in 2025, with prices expected to rise until 2027 due to supply adjustments and reduced losses among farmers [5][16] - The current beef price has been under pressure, with a cumulative decline of nearly 25% from the peak in 2023, but the report suggests that the market is poised for recovery [5][10] Dairy Market Outlook - The raw milk market has been underperforming, with prices dropping below cash costs, but improvements are anticipated in the second half of 2025 as supply and demand dynamics shift [17][25] - The report notes that the culling of dairy cows will provide additional beef supply, reinforcing the interconnectedness of the beef and dairy markets [19][20] Investment Recommendations - The report recommends focusing on companies directly benefiting from the beef market recovery, such as Bright Meat Industry, and suggests monitoring dairy farming companies like Yuran Dairy, Modern Farming, and China Shengmu for potential performance recovery [4][26]

Investment Rating - The report maintains an "Outperform" rating for the beef cattle industry [1] Core Insights - The beef cattle industry in China is expected to experience a significant cycle reversal in 2025, driven by supply adjustments and import controls [6] - The domestic beef market has faced challenges due to low-priced imports, leading to a decline in local beef prices from 2023 to 2024 [3][4] - The supply of beef cattle is anticipated to clear significantly, potentially mirroring the 2019 pig cycle, as the industry is currently in a prolonged state of loss [5][6] Overview: Supply and Demand Analysis - China is the largest beef producer and consumer globally, with a production share of 13% and a consumption share of 19% in 2024 [14] - The domestic beef production is projected to be 7.8 million tons in 2024, with a compound annual growth rate of 1.25% over the past decade [14] - The beef cattle supply adjustment is notably slower compared to other livestock, with a typical cycle from breeding to market taking around two years [10] Import Outlook - Future beef imports are likely to decrease in volume but increase in price due to domestic supply constraints and international market dynamics [4] - The U.S. is expected to see a reduction in beef cattle inventory, which will support higher local beef prices [4][6] Domestic Supply Outlook - The domestic beef cattle farming structure is highly fragmented, with a significant number of small-scale farmers, leading to inefficiencies [20][54] - The industry is currently experiencing deep losses, with reports indicating a loss of approximately 1,600 yuan per head by late 2024 [22] Conclusion - The report is optimistic about a reversal in the beef cattle cycle starting in 2025, with potential peak prices exceeding 60 yuan/kg, leading to historically high profits for farmers [6]