Huaxi Securities has issued a research report updating its financial forecasts for Youran Dairy. The report revises the company's projected 2026-2027 revenue down to 227 billion yuan and 245 billion yuan, from previous estimates of 244.9 billion yuan and 257.9 billion yuan, respectively. A new forecast for 2028 revenue is set at 262 billion yuan. Net profit attributable to shareholders for 2026-2027 is adjusted downward to 970 million yuan and 1.24 billion yuan, from prior estimates of 1.07 billion yuan and 1.47 billion yuan, with a new 2028 forecast of 1.78 billion yuan. Earnings per share for 2026-2027 are revised to 0.23 yuan and 0.30 yuan from 0.28 yuan and 0.38 yuan, with a new 2028 EPS forecast of 0.43 yuan. Based on the closing price of HKD 3.85 on April 28, 2026, the corresponding price-to-earnings ratios for 2026, 2027, and 2028 are 17x, 13x, and 9x, respectively, leading to the maintenance of a "Buy" rating.
The main points of the report are as follows:
For the 2025 fiscal year, the company reported revenue of 20.654 billion yuan, a year-on-year increase of 2.8%. It recorded a net loss attributable to shareholders of 432 million yuan, an improvement compared to a loss of 691 million yuan in the previous year. Specifically, in the second half of 2025, revenue was 10.37 billion yuan, up 3.2% year-on-year, with a net loss attributable to shareholders of 135 million yuan, narrowed from a loss of 360 million yuan in the same period last year, indicating a reduction in losses for the full year.
Breaking down the business segments, the raw milk business reported revenue of 16.02 billion yuan for FY2025, a year-on-year increase of 6.1%, while the ruminant farming system solutions business generated revenue of 4.63 billion yuan, down 7.4% year-on-year. In the second half of 2025, the raw milk business revenue was 8.13 billion yuan, up 4.5% year-on-year, and the solutions business revenue was 2.24 billion yuan, down 1.1% year-on-year. The raw milk segment demonstrated steady growth. In terms of volume and price, the company sold 4.153 million tons of raw milk in FY2025, a 13.2% increase year-on-year, with an average selling price of 3.86 yuan per kilogram, down 6.4%. In the second half, sales volume was 2.1133 million tons, up 10.75% year-on-year, with an ASP of 3.85 yuan per kg, down 5.7%, a smaller decline than in the first half. From a production perspective, the total herd size remained stable at 619,000 head by the end of FY2025, a slight decrease of 0.4% year-on-year. The number of mature cows increased by 4.8% to 340,000 head, representing 55.0% of the total herd, up 2.7 percentage points year-on-year. The annualized yield per mature cow (excluding Jersey cows) was 12.8 tons, an increase of 1.6%.
On the cost side, the gross profit margin for FY2025 and the second half of 2025 was 29.8% and 29.6%, respectively, up 1.0 and 0.4 percentage points year-on-year. The improvement is attributed to lower procurement prices in the domestic bulk raw material market and the company's ongoing efforts in lean operational management. Regarding expenses, the sales expense ratio for FY2025 and H2 2025 was 3.1% and 3.2%, down 0.1 percentage point and flat year-on-year, respectively. The management expense ratio was 4.1% and 4.4%, up 0.1 percentage point in both periods. Overall, the company's expense ratios remained stable.
Apart from costs and expenses, the company recorded a significant fair value loss on biological assets, which impacted reported profits. In FY2025, the fair value loss on biological assets was 4.312 billion yuan, an increase of 391 million yuan year-on-year. This was primarily due to lower raw milk selling prices, an increase in culled cattle, and losses from a year-on-year decrease in the local market price of 14-month-old heifers, partially offset by factors such as rising beef cattle prices, higher yields, and continued declines in feed costs. Excluding these factors, the cash EBITDA, which better reflects the company's actual operational performance, reached 5.587 billion yuan in FY2025, a steady increase of 4.9% year-on-year.
Historically, raw milk prices are significantly influenced by supply and demand dynamics and exhibit cyclicality. Since peaking in 2021, milk prices have been in a four-year downtrend due to sustained supply increases and weak demand. Looking ahead, it is believed that supply-side adjustments will continue, while demand is expected to recover gradually, suggesting that the milk price cycle is nearing a reversal. In the medium term, due to the difficulty of quickly replenishing supply capacity after its reduction, the market is expected to remain in a tight balance for the next 2-3 years. As a leading company in the industry, Youran Dairy is well-positioned to benefit from this industry adjustment, with significant potential upside expected upon a cyclical rebound.
Risks include slower-than-expected capacity reduction, weaker-than-anticipated consumption recovery, and unexpected changes in bulk commodity costs.
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