China Post Securities: Maintaining Excellent Animal Husbandry (09858) “Buy” Rating Company Profits Are Expected to Be Released Faster

The Zhitong Finance App learned that China Post Securities released a research report saying that Youran Animal Husbandry (09858) is benefiting from the continued degradation of dairy cows and a significant rise in beef prices, and profits from hunting for cattle are expected to increase significantly. At the same time, dairy companies are deploying deep processing capacity to effectively regulate market supply, which is expected to further accelerate the industry's production capacity clearance and jointly promote the recovery of raw milk prices in 2026. Maintain a “buy” rating.

China Post Securities's main views are as follows:

Cow stocks continue to clear, and raw milk prices are expected to recover in '26

The decline in dairy cows continues to deepen and accelerate. Multiple factors are jointly driving the industry's production capacity back to balance supply and demand. Since reaching a phased high in February 2024, the number of dairy cows in the country has decreased by a total of 540,000 heads in the past 20 months, a decrease of 8.1%. Recently, the rate of degeneration in a single month has further accelerated. In addition, some regions were affected by continuous rainy weather in the third quarter, and storage of silage was blocked, leading to a shortage of reserves. Many ranches were unable to maintain their original storage scale due to feeding pressure, and efforts to eliminate low-yielding cows and keep clean-up continued to increase. This process not only optimized the industry's herd structure, but also effectively relieved the pressure of previous oversupply, and laid the foundation for stable fresh milk prices. At the same time, the dairy industry is digesting raw milk through increased processing capacity, forming an important support for supply and demand regulation. Solid dairy products such as deep-processed cheese, whole milk powder, skimmed milk powder, etc., consume several times more raw milk than liquid milk products, and have become a key factor in balancing market supply.

Leading dairy companies have set up related tracks. Junlebao and Sinodis have cooperated to launch high-end whipped cream. Yili and Mengniu are focusing on the original cheese category. Mikolanduo continues to expand the production capacity of original cheese, and companies such as Guangming have also enriched the deep processing matrix through new product iterations. A number of deep processing projects in the industry have been built or put into operation one after another, which not only extends the value of the industrial chain, but can also flexibly undertake the supply of raw milk, ensure the stable development of the industry while storing and decontaminating, and promote the transformation of the dairy industry to high quality.

Beef prices began to reverse in '25, and the company's profit from hunting for beef is expected to increase

According to iFind, the average wholesale price of domestic beef increased from 57 yuan/kg in February to 66 yuan/kg in December, an increase of 15.79%. In order to optimize the population structure for long-term development, the ranch will eliminate some adult cows every year. The price of eliminated cows is related to the price of beef in the market. During the upward phase of beef prices, the farm's cattle rushing profits are expected to follow the rise. This portion of the revenue is mainly reflected in changes in the fair value of biological assets. In the future, as beef prices rise further, the bank expects the company's profit from hunting for beef to increase further. At the same time, the rise in beef prices is also expected to drive dairy cows to further reduce production capacity and accelerate the balance between supply and demand for raw milk.

Based on this, the bank calculates incremental profit elasticity: 1) Cow elimination assumption: According to Holstein, about 28% of low-yielding or elderly cows will be eliminated from the cow inventory at the beginning of each year. In order to maintain a stable ratio of adult cows, the bank expects about 40% of the annual reserve heifers to be converted into adult cows, of which a small amount of 10% will be eliminated. Also, the bank expects the probability of male and female newborn calves to be equal each year. The bank expects an average annual increase of 4% of excellent dairy cows from 2026-2027, while maintaining a 52% cow stock ratio. The bank calculated 300 kg/head for adult cows and 50 kg/head for young bulls. Based on this, it was determined that the amount of cows eliminated in 2025-2027 was 3.09/3.20 /33,200 tons, respectively, and the amount of cows eliminated was 0.81/0.84/0.87 million tons, respectively. 2) Profit elasticity calculation: According to the Shandong Dairy Industry Association, the bank estimates that in 2024, the elimination price for young adult cows is 15.5 yuan/kg, and the elimination price for young bulls is 22 yuan/kg. Assuming that the 2025/2026/2027 price increase was 10%/25%/35%, respectively, compared to 2024, it is determined that the elimination of excellent herding cows in 2025-2027 will each bring the company a profit increase of 0.87/1.55/ 275 million yuan, and the elimination of the little bulls will each bring a profit increase of 0.40/0.58/ 103 million yuan, bringing in total profit increases of 127/213/378 million yuan.

Profit prediction and investment advice

According to the Dairy Times, the number of dairy cows has dropped below 6 million heads in 2025, and it is expected that inertia will drop further to around 5.8 million heads in 2026, thus completing the quantitative reduction of production capacity. Raw milk prices continued to bottom out in 2025, and the decline narrowed significantly from month to month. Raw milk prices are expected to recover after capacity removal is completed in 2026. The recovery in raw milk prices is compounded by a reversal in beef prices, and the company's profit and biological asset impairment are expected to improve dramatically. The bank expects to achieve revenue of 208.05, 217.22, and 22.982 billion yuan in 2025-2027, up 3.53%, 4.41%, and 5.80% year on year; achieving net profit of 5.12, 16.78, and 2,856 billion yuan respectively, up 174.12%, 227.65%, and 70.19% year on year, maintaining a “buy” rating.

Risk warning: Food safety risks; raw milk price recovery falls short of expected risk; beef price recovery falls short of expected risk.