Guosheng Securities: The implementation of the preliminary anti-subsidy ruling is expected to drive the shift of the deep processing business of dairy products to the domestic market

The Zhitong Finance App learned that Guosheng Securities released a research report saying that the Ministry of Commerce announced the preliminary ruling on the countervailing investigation against dairy products imported from the European Union and implemented temporary countervailing deposit measures on imported dairy products originating in the European Union on December 23. According to the China Dairy Industry Trade Monthly Report, from January to October 2025, the EU accounted for 14.5% of imported cheese and 29.4% of cream imported from China. The current levy of countervailing duty guarantees against the European Union is expected to drive the shift of the deep processing business of dairy products to the domestic market, and domestic milk prices are currently lower than overseas, which is expected to accelerate domestic substitution. For the upstream raw milk industry chain, deep processing is expected to increase the consumption of raw milk and further promote the improvement of the supply and demand pattern from the demand side.

Guosheng Securities's main views are as follows:

Preliminary anti-countervailing ruling on dairy products was implemented, and a countervailing deposit of at least 20% was imposed

The Ministry of Commerce issued a notice on August 21, 2024, deciding to open a countervailing investigation against dairy products imported from the EU (fresh cheese and curd, processed cheese, whipped cream, etc.). After multiple rounds of negotiations, sample surveys, field inspections, etc., it was initially determined that there were subsidies for imported dairy products originating in the European Union, which caused substantial damage to the domestic related dairy industry. It was decided to adopt a temporary countervailing duty deposit for relevant dairy products originating in the European Union from December 23, 2025. The deposit amount is determined based on the taxable price* temporary countervailing duty deposit ratio. Previously, the EU's tariff rate for import-related categories was mostly between 8-15%. Currently, the additional countervailing guarantee ratio is in the range of 21.9-42.7%, which is generally close to 30%.

Import prices are being raised in disguise, and domestic substitution is expected to accelerate

According to a survey by the Ministry of Commerce, imports of EU related products in 2020-24M3 accounted for 23.6-34.6% of China's total imports of related dairy products. According to the China Dairy Industry Trade Monthly Report, from January to October 2025, the EU accounted for 14.5% of imported cheese and 29.4% of cream imported from China. The current levy of countervailing tax guarantees against the European Union is expected to drive the shift of the deep processing business of dairy products to the domestic market. Currently, Mikolanduo, Yili, Mengniu, and Lizao enterprises are all focusing on setting up deep processing business, and domestic milk prices are currently lower than overseas, which is expected to accelerate domestic substitution.

Deep processing drives demand expansion and boosts raw milk supply and demand improvement

For the upstream raw milk industry chain, deep processing is expected to increase the consumption of raw milk and further promote the improvement of the supply and demand pattern from the demand side. Milk prices in major domestic production areas have stabilized at the bottom since August, mainly due to the removal of social ranches to clear supply. The demand-side increase mainly comes from the expansion and deep processing of consumption scenarios such as milk tea. Currently, it is expected that raw milk consumption will increase from the demand side, which will jointly drive the stability of supply and demand in the industry.

Aspect of the target

From the perspective of digging deeper into domestic deep processing business potential and balancing raw milk supply and demand, it is beneficial 1) deep processing business: Mikolanduo (600882.SH), Yili shares (600887.SH), Mengniu Dairy (02319), Ligao Foods (300973.SZ); 2) upstream animal husbandry: Youran Animal Husbandry (09858), Modern Animal Husbandry (01117), and China Shengmu (01432).

Risk Alerts

The expansion of the deep processing business fell short of expectations, competition in the industry intensified, and the early profit margin of layout deep processing was limited.