Youran Dairy (09858.HK), a leading dairy enterprise in Inner Mongolia, has successfully reversed its losses. On July 28, the company released a profit alert, projecting a net profit of approximately 739 million to 903 million yuan for the first half of the year. This marks a significant turnaround from a loss of about 297 million yuan during the same period last year.
Youran Dairy operates 100 modern farms with a dairy cow population of roughly 619,000, making it the world's largest supplier of raw milk. Despite its strong ties to Yili, the company had been unable to escape the impact of the dairy industry's downturn in recent years, entering a period of sustained losses beginning in 2023. However, entering 2026, China's raw milk industry, after a five-year period of deep adjustment, has finally reached a cyclical turning point.
Turning Loss into Profit
The management team, led by Chairman Hao Haijun, attributes the first-half turnaround to "one decrease and one increase." The "decrease" refers to a substantial narrowing of losses from market value fluctuations. This improvement is primarily driven by three factors: a narrowing decline in raw milk prices, a sustained rise in the price of culled cows, increased milk yield per cow, and lower feed costs. Since the beginning of this year, raw milk prices have gradually stabilized. Data from the Ministry of Agriculture and Rural Affairs shows that in the third week of July, the average price of fresh milk in major producing provinces rebounded to 3.05 yuan per kilogram, breaking through the previous bottom range of 3.02-3.04 yuan per kilogram for the first time since last June. Simultaneously, prices for culled cows have risen significantly. By the end of June, the national average price for culled cows had increased by nearly 17% from the start of the year. These combined factors have improved profit performance.
The "increase" is attributed to the continuous improvement in the operation of the core business. Benefiting from enhanced breeding efficiency, the raw milk business has achieved sales growth and reduced feed costs. According to financial reports, in 2025, Youran Dairy's raw milk business generated revenue of 16.02 billion yuan, with raw milk sales reaching 4.15 million tons, representing year-on-year increases of 6.1% and 13%, respectively. In terms of cost reduction, the feed cost per kilogram of milk has already dropped to 1.88 yuan, a 10.5% decrease year-on-year. Management also noted that the ruminant farming system solutions business, through product iteration and structural optimization, contributed to gross profit growth in the first half of the year. In early July, Youran announced at the Dairy Conference the launch of its independently developed AI system for precision ruminant nutrition, called "AI Doctor Niu," the first commercial AI system in the domestic dairy cow nutrition field.
Binding with Yili
Boosted by the profit news, Youran Dairy's share price surged 10.42% on July 29, closing at 4.24 Hong Kong dollars, with a total market capitalization of approximately 19 billion Hong Kong dollars. "The industry is entering a phase of accelerated capacity elimination, with resources concentrating among leading players," said Wu Zewei, a special researcher at Suxin Bank. He noted that Youran's advantage lies in its complete upstream full-industry-chain layout, covering breeding, forage planting, feed processing, and fresh milk production, which effectively hedges against raw material price fluctuations. "The company is deeply bound with downstream leading dairy companies, with outstanding supply capabilities for high-end specialty fresh milk, giving its products better pricing power than its peers," Wu added.
Yili is increasing its investment, spending over 1.1 billion Hong Kong dollars on June 30 to increase its stake in Youran Dairy. Its shareholding has now reached 36.07%, solidifying its position as the largest shareholder. Simultaneously, the two parties have signed a three-year exclusive raw milk supply agreement, locking in over 70% of Youran's annual raw milk production capacity to supply Yili's high-end dairy products and deep-processed items. "With milk prices bottoming out and recovering, bulk milk prices rising, and the number of adult cows continuing to decline," said Li Shengli, chief scientist of the National Dairy Cow Industry Technology System, predicting a sustained, slight increase in milk prices in the second half of the year. When the milk price cycle truly reverses, Youran Dairy's earnings potential is expected to continue to be released. "Future industry competition will shift its focus to cost control, breeding technology, and specialty milk source layout," Wu Zewei stated, adding that companies with full-chain synergy capabilities will widen the gap with their peers.
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