Summary of the Conference Call for YouRan Dairy Industry Company Overview - YouRan Dairy is a leader in the upstream dairy industry in China, covering cow breeding, feed production, and raw milk production, with raw milk accounting for approximately 75% of its business and feed accounting for 24% [3][5][6] - The company has over 600,000 dairy cows and a market share of nearly 10% in raw milk production, making it the largest dairy farming company in China [3][5] Industry Characteristics - The dairy farming industry is characterized by supply rigidity and strong cyclicality, with a minimum of 26 months required for cows to start lactating after birth, leading to significant delays in capacity adjustments [3] - The average production cost of raw milk in China is approximately 3.46 RMB/kg, while the latest fresh milk price is 3.08 RMB/kg, resulting in losses for many dairy companies [13] Financial Performance - YouRan Dairy has experienced steady revenue growth, but net profit has been volatile, primarily due to the fair value assessment of biological assets, with losses of 2.3 billion RMB in 2022 and 3.1 billion RMB in 2023 [3][9][10] - The company’s revenue is projected to be 22.84 billion RMB in 2025 and 26.26 billion RMB in 2026, with net profits of 930 million RMB and 2.3 billion RMB, respectively [20] Market Dynamics - The current raw milk price cycle has been declining for 45 months, with a total drop of 31.3% from the peak price of 4.5 RMB/kg in July 2021 to the current price of approximately 3.08 RMB/kg [12][18] - The supply-demand balance is expected to improve by the second half of 2025, with a projected price of around 4.2 RMB/kg by 2026 [19] Strategic Partnerships - YouRan Dairy is closely tied to Yili Group, which is both its largest shareholder (33.93%) and its largest customer, accounting for 96% of its raw milk sales in 2023 [3][6][7] - The partnership allows YouRan to maintain a high sales price, approximately 20% above the market average, while only meeting 20% of Yili's demand, indicating significant growth potential [3][7] Investment Outlook - The investment outlook for YouRan Dairy is positive, especially as the raw milk price cycle is expected to reverse, presenting potential investment opportunities despite inherent risks such as low raw milk prices and disease outbreaks [21][23] - The company’s stock price volatility is largely influenced by changes in the fair value of biological assets, which can lead to significant losses during price downturns [21] Additional Insights - The dairy farming sector is facing challenges due to increased supply and declining demand, with a 6.52% drop in dairy product revenue over the past three years [15] - The industry is divided into three categories: large dairy enterprises with self-owned farms, large dairy groups, and socialized farms, with the latter experiencing a significant decline in stock [17] This summary encapsulates the key points from the conference call regarding YouRan Dairy and the broader dairy industry, highlighting the company's market position, financial performance, and future outlook.
优然牧业20250319