Group 1: Company Overview - Yuran Dairy's stock price has increased from 1.03 HKD to 3.92 HKD, indicating significant growth potential despite current valuations [1][3] - The company has a strong relationship with Yili, selling nearly all its products to them, which provides a stable revenue stream [3][4] - Yuran Dairy's high debt ratio is a concern, but its cash flow is robust due to guaranteed sales to Yili [4][8] Group 2: Investment Strategy - The investment approach for Yuran Dairy has shifted from a left-side trading strategy (buying on dips) to a right-side strategy (buying on upward trends) [2][4] - The company is expected to benefit from an industry cleanup starting in the second half of 2024, which could improve profitability [2][8] - The current market conditions and capital inflow into the dairy sector have positively impacted Yuran Dairy's stock price [4][5] Group 3: Market Dynamics - The dairy farming industry is facing high levels of debt and losses, with 90% of companies in the sector currently unprofitable [8] - The cyclical nature of the pig farming industry is highlighted, suggesting that similar dynamics may affect dairy farming in the future [5][8] - The upcoming third quarter is critical for cash flow management in the dairy sector due to the need for feed purchases [7][8]

Core Insights - The Chinese dairy industry has made significant advancements, surpassing EU standards in key quality indicators such as protein, fat, somatic cell count, and total bacterial count, marking a historic leap in quality [1][2][4] - The average milk yield per cow in China has reached international advanced levels, with large-scale farms producing over 10 tons of fresh milk annually [2][5] - The report indicates that the quality of Chinese milk is at its best historical level, with protein and fat content comparable to developed countries, making it one of the safest and most nutritious food options for consumers [2][4] Industry Development - The Chinese dairy industry has transitioned from being a global laggard to a leader through continuous exploration and innovation, establishing a high-quality development path [5] - Inner Mongolia is a key region for milk production, contributing to one-fifth of the national supply, with major investments in dairy clusters enhancing competitiveness [6] - The average scale of dairy farms in China is now among the largest globally, with 78% of farms housing over 100 cows by 2024 [6][7] Quality Improvement - The average bacterial count in raw milk from leading companies like Yili has been maintained below 10,000 CFU/mL for two consecutive years, significantly lower than the EU standard of 100,000 CFU/mL [3][4] - High-quality raw milk is essential for the dairy processing industry, improving product competitiveness and consumer confidence in domestic dairy products [4][10] Technological Innovation - The integration of digital tools and mechanization in dairy farming has significantly improved labor efficiency and production quality [8] - Smart farming technologies, such as automated feeding systems and environmental control, have enhanced the living conditions for dairy cows, leading to increased milk production and quality [7][8] Future Outlook - The report emphasizes the need for the Chinese dairy industry to focus on innovation, collaboration, and sustainable practices to enhance competitiveness and profitability [9][10] - The industry is encouraged to adopt moderate-scale farming, improve feed efficiency, and develop local feed resources to reduce costs and increase revenue [9][10] - The transformation of agricultural waste into valuable resources, such as organic fertilizers and biogas, showcases the industry's commitment to sustainability and economic growth [11]

Summary of China Shengmu's Conference Call Company Overview - **Company**: China Shengmu - **Industry**: Organic Dairy Market in China Key Points and Arguments Market Demand and Growth - The demand for organic milk in China is growing, benefiting Shengmu as the largest organic farm in the country due to consumer preference for high-end, healthy products [2][3] - The optimistic market outlook is supported by rising per capita consumption levels, which will further drive the organic milk market [2] Raw Milk and Beef Prices - Raw milk prices have been declining since 2021, but the rate of decline has slowed, with prices expected to stabilize as production capacity nears clearance [2][4] - Beef prices have rebounded since 2023 due to anti-dumping policies and supply shortages, significantly improving Shengmu's profit performance [2][4] Financial Projections - Shengmu is expected to incur losses in 2025 but conservatively estimated to achieve a profit of approximately 400 million yuan in 2026, corresponding to a PE ratio of about 5 times, indicating significant valuation upside compared to peers [2][6] - The company maintains a gross margin of around 30% and exhibits strong financial metrics, including cash ratios [2][4] Competitive Advantages - Shengmu's raw milk sales price has consistently remained around 4 yuan, with a high proportion of specialty milk (organic, A2, etc.) enhancing its defensive and operational resilience during price downturns [2][24] - The geographical advantage of being located in the Ulan Buh Desert provides ample underground water and fertile soil, supporting feed crop cultivation [2][25] - The partnership with Mengniu ensures stable milk supply, with a structure requiring over 80% of milk to be supplied to Mengniu [2][22] Industry Dynamics - The Chinese dairy processing industry is characterized by a fragmented upstream supply of dairy farms, while midstream and downstream sectors are dominated by major players like Yili and Mengniu [2][7] - The scarcity of upstream breeding resources is pushing the industry towards larger-scale operations, with only about 2% of farms having over 100 cows as of 2022 [2][8][9] Future Trends - The global organic food market is valued at hundreds of billions, with China's market expected to continue double-digit growth, indicating a strong future for high-end organic products [2][21] - Shengmu's unique position as the first brand to receive dual organic certification from China and the EU enhances its market standing [2][23] Profitability and Valuation - The stabilization and potential rebound of milk prices will significantly enhance the fair value of biological assets, with a potential increase of 240 million yuan if each cow appreciates by 1,000 yuan [2][27] - The beef business, which was previously a loss-maker, is expected to contribute positively to profits in 2025 due to rising beef prices [2][28] Challenges and Risks - The industry faces challenges such as high costs associated with feed crop cultivation and environmental management for large-scale farms [2][11] - Socialized farms are under pressure due to low profitability and high debt levels, leading to a potential wave of exits from the market [2][16][17] Conclusion - Shengmu's focus on high-margin organic products, strategic partnerships, and favorable market conditions position it well for future growth, despite short-term challenges and expected losses in 2025 [2][26][30]

Core Viewpoint - The agricultural sector, particularly in beef and dairy farming, is recovering from previous losses due to a series of supportive policies and market improvements [2][3]. Group 1: Market Situation - The beef cattle industry has turned profitable after a period of losses, with live cattle prices rebounding since the Spring Festival, leading to three consecutive months of profitability [2]. - In the dairy sector, there has been a 4.2% year-on-year decrease in the number of Holstein cows, and the cost of milk production has dropped by 7.7% year-on-year, indicating a positive trend in dairy farming [2]. Group 2: Policy Measures - The Ministry of Agriculture and Rural Affairs is implementing various relief measures, including financial support and monitoring of dairy farms, to stabilize the market and improve production efficiency [3]. - Policies are being guided to enhance the quality of breeding stock and to control production capacity, aiming to stabilize market expectations [3]. Group 3: Future Outlook - The Ministry plans to continue promoting relief measures, focusing on extending the industrial chain, increasing added value, and enhancing competitiveness in both beef and dairy sectors [2][3]. - Upcoming factors such as reduced production due to heat stress in dairy cows and increased consumption of cold drinks are expected to further support the recovery of the dairy market [2].

Group 1: Macroeconomic Insights - In June, the US CPI increased by 2.7% year-on-year, up from 2.4% in May, with energy prices rebounding as a key factor [1] - Core CPI growth remained moderate, indicating a rise in inflation breadth and stickiness [1] - The US core goods prices rebounded to 0.2% month-on-month, with a year-on-year increase of 0.7%, marking the second consecutive month of recovery [1] Group 2: Federal Reserve and Market Implications - The impact of tariffs on inflation is evident but remains moderate, suggesting the Federal Reserve needs more time for assessment before making quick decisions [2] - The expectation is for the Federal Reserve to initiate interest rate cuts in the fourth quarter [2] - The data has not significantly affected US stock pricing, with market differentiation occurring under industry logic [2] Group 3: Economic Growth and Investment Trends - The actual GDP growth for Q2 2025 was 5.2%, recovering from 4.6% and 4.7% in the previous two quarters [3] - Nominal GDP growth remains a shortcoming, with a year-on-year increase of 3.9% in Q2, indicating constraints on microeconomic sentiment [3] - Fixed asset investment growth in June was significantly low, suggesting potential issues with capital formation in the economy [3] Group 4: Agricultural Sector Developments - The dairy industry is experiencing a prolonged loss cycle, with milk prices at a low point for 18 months [4] - Social milk prices have rebounded in Q2 due to the reduction in dairy cow inventory, but profitability remains a challenge for social farms [4] - The upcoming autumn season poses financial pressures on farms due to the need for silage procurement, potentially accelerating industry capacity reduction [4] Group 5: Retail Sector Performance - In June, China's retail sales grew by 4.8% year-on-year, with total retail sales amounting to 4.23 trillion yuan [7] - The retail performance varied by category, with food and beverage retail sales showing mixed results [7] - Online retail leaders are reshaping supply chains, improving profitability by closing unprofitable stores [8]

Summary of the Conference Call for YouRan Agriculture Company Overview - YouRan Agriculture is the largest dairy cattle farming enterprise globally, controlled by Yili Group, covering the entire cycle of breeding, farming, and feed raw material production. Over 90% of its raw milk products are sold to Yili [2][5][10]. Industry Insights - Domestic beef prices are expected to reach historical highs within the next two to three years, while milk prices are rebounding after hitting a low. The industry has already reduced about 10% of its capacity, with further reductions anticipated in the second half of the year [2][3]. - The domestic beef cattle farming industry has experienced significant losses, with a reduction of nearly 30% in breeding and technical cows. A decrease in domestic beef supply is expected by the second half of 2025, indicating a clear price turning point [4][11]. - Globally, beef cattle production has decreased by about 5%, with beef prices starting to recover since 2024, having risen nearly 40% cumulatively [4][12]. Financial Performance - In 2024, YouRan Agriculture's revenue is projected to reach 20.1 billion yuan, but it is expected to incur a net loss of nearly 700 million yuan due to falling raw milk prices and biological asset impairments. Profitability is anticipated to improve starting in 2025 as costs decline and beef prices recover [2][6]. - YouRan's revenue composition includes 75% from goat milk with a gross margin of 30%-40%, and 25% from ancillary businesses like feed, which has a gross margin of 17% [2][7][8]. Capital Expenditure and Cash Flow - Capital expenditures have significantly increased since 2020, but no large-scale capacity expansion is planned in the short to medium term. A reduction in capital expenditures is expected starting in 2025 [9]. - The cash cost of producing raw milk is approximately 3.9 yuan per kilogram, with a sales average of 4.1 yuan per kilogram in 2023, indicating a premium of about 30% over industry costs [9]. Future Profitability and Market Dynamics - The company expects to sell approximately 100,000 culled cows annually, with prices currently at historical lows of 7,000 yuan per head, potentially rising to 14,000-15,000 yuan per head by 2026, contributing significantly to profits [15][16]. - The raw milk business is projected to significantly enhance profitability, with expected sales volumes reaching 4.1 million tons by 2025 and 4.3 million tons by 2026. An increase in raw milk prices could add approximately 2 billion yuan to profits by 2027 [17]. Valuation and Market Position - YouRan Agriculture's current price-to-book (PB) ratio is around 1.1, at historical lows, with potential for significant recovery. The price-to-earnings (PE) ratio is also expected to double as market conditions improve [18]. Conclusion - The overall outlook for YouRan Agriculture is positive, driven by anticipated price recoveries in both beef and raw milk markets, alongside strategic operational adjustments and a strong market position as a leading enterprise in the dairy sector [18].

Core Viewpoint - The dairy farming industry in China is facing significant challenges, with cumulative income losses projected to reach 70 billion yuan from 2023 to 2025, and losses from fresh milk powder estimated at 20 billion yuan. The current reliance on government support and project subsidies is insufficient to fundamentally resolve these issues, and capacity reduction is deemed the most effective way to achieve supply-demand balance and stabilize milk prices [2][6]. Industry Challenges - The dairy industry is experiencing a phase of supply-demand imbalance, with consumer demand showing signs of weakness. In 2024, the national dairy product output is expected to reach 29.618 million tons, indicating relative stability in overall production [2][6]. - The bottom of the current cycle has been identified, with a reversal expected in approximately one year [4][5]. Recommendations for Recovery - Continuous implementation of industry relief policies for 1-2 years is necessary, focusing on leading dairy enterprises to manage capacity reduction effectively. This includes adjusting the breeding structure and increasing the proportion of mature cows to 55%-60% over the next year [6][9]. - Leading dairy companies are encouraged to stabilize basic production capacity through mergers, equity participation, and long-term management of social pastures over the next three years [6][9]. Growth Potential - Economic growth is expected to drive an increase in milk consumption, with an estimated annual consumption increment of 1 million tons, despite a decline in population [8]. - The national dairy cow stock is projected to be controlled at an overall increase of no more than 500,000 heads during the 14th Five-Year Plan, with an average annual increase of 100,000 heads [8]. Strategic Upgrades - Establishing a strategic regulation mechanism for the dairy farming industry is recommended, drawing on successful management experiences from developed dairy countries [11][12]. - A legal and effective fresh milk pricing mechanism should be developed to reflect supply-demand dynamics, production costs, and consumer conditions [11][12]. - Promoting the integration of dairy farming and feed production, enhancing land support policies, and ensuring each dairy cow has a land allocation of 2 acres are also suggested [11][12].

Core Insights - The dairy farming industry in China is facing significant challenges, with cumulative income losses projected to reach 70 billion yuan from 2023 to 2025, and losses from fresh milk powder estimated at 20 billion yuan [1][4] - Current government support and project subsidies are insufficient to fundamentally resolve the issues, and capacity reduction is deemed the most effective way to achieve supply-demand balance and stabilize milk prices [1][4] Industry Overview - The national dairy product output is expected to reach 29.618 million tons in 2024, indicating relative stability in overall production, but the market is experiencing a phase of supply-demand imbalance due to a weak consumption environment [1] - The bottom of the current cycle has been identified, with a reversal expected in about one year [3] Capacity Reduction Strategies - Continuous implementation of industry relief policies is necessary for 1-2 years, focusing on leading dairy enterprises to drive capacity reduction in milk source bases by 2025-2026 [4][5] - Recommendations include increasing the proportion of breeding cows to 55%-60% and enhancing the standards for reserve cows, alongside using core breeding technologies to prevent significant future capacity declines [4][5] Consumption Growth Potential - Economic growth is expected to drive an increase in milk consumption, with an estimated annual consumption increment of 1 million tons, despite a decline in population [5] - The average annual increase in dairy cow stock is planned to be controlled at 100,000 heads, with a target of breaking through an average milk yield of 11 tons per cow [5] Strategic Recommendations - Establishing a strategic regulatory mechanism for the dairy industry is suggested, drawing on successful management practices from developed dairy nations [7] - A legal and effective pricing mechanism for fresh milk should be developed to reflect supply-demand dynamics and production costs [7] Transition Pathways - The industry is encouraged to transition towards a green and low-carbon model, enhancing cow longevity and management practices, and increasing research and technology promotion [8] - The integration of dairy farming with land use policies is recommended, aiming for a land allocation of 2 acres per cow [7][8]

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]

文章转自2025年03月18日太平洋农林牧渔团队报告 ，分析师： 程晓东/ 李忠华 投资要点 原奶行业特点： 来需要 24垒场短时间内很难进入其供应链。 ，个目月2前；年以上的时间。其次，消费需求稳增。供给刚性主要由两方面因素决定： 投b.生资产新区建1）域奶周比牛期较场性集的较中投强，资：难额近以度年扩较来张大，。，原奶私奶牛人价喜资格凉本波怕占动热比通，较常生小五产。年性3）左能下右受游一温客个度户周影稳期响定。较a.性周生物资产特点。奶牛这一生物资产生产周期较长，从补栏到原奶产出需要至少 大较期，强性全，主球由要公于受认食两的品方"安黄面全金因特奶素殊源影性响带要："在求首我，先国大，仅型供占乳给国企具土对有面原刚积奶性的质，15%量一要旦。求生2）非产较短常高缺的，资恢新复本建起牧壁 优然牧业为国内奶牛养殖第一龙头，集规模、成本和客户优势为一体。 1）优然牧业是国内最大原奶供应商，产能规模位居全国第一。现拥有96座牧场、管理饲 养近60万头奶牛，原奶产量占全国的9.7%。2）产业链覆盖奶牛育种、饲料、养殖，规模效应显著，奶牛单产达到12.6吨，原奶饲料成本2.17元/公斤。3）手握优 质客户，优势明显 ...