The Zhitong Finance App learned that Dongwu Securities released a research report stating that it covered Youran Animal Husbandry (09858) for the first time and gave it a “buy” rating. The bank estimates that the company's net profit from 2026 to 2028 will be 1.56 billion, 2.89 billion and 3.64 billion yuan, respectively, up 462%, 85% and 26% year-on-year, respectively, with corresponding price-earnings ratios of 10 times, 5 times and 4 times, respectively. The bank expects milk prices to bottom out and recover moderately. Coupled with the strong rise in the beef cattle cycle, it believes that those with strong basic animal husbandry markets will continue to be strong and profitable.
The main views of Dongwu Securities are as follows:
Leading animal husbandry industry, comprehensive layout, expanded collaboration
Youran Animal Husbandry is the largest upstream integrated product and service provider for the dairy industry in China. Its main business includes providing fresh milk to middle and downstream dairy companies and providing systematic solutions for ruminant farming to ranches. The company acquired Cycostar in 2020 to complete the dairy breeding sector, and the upstream business layout is more comprehensive. Total revenue of 20.7 billion yuan was achieved in 2025, of which raw milk and solution revenue accounted for 78% and 22% respectively. The company's core management team mostly comes from Yili Co., Ltd. (600887.SH), a leader in the domestic dairy industry. The company has fully benefited from its resource advantages and management experience, and can also effectively amplify the synergy effects of the entire dairy industry.
During the period of deep adjustment of milk prices, excellent resilience to risks is outstanding
Farm operations are affected by a combination of milk prices, meat prices, and feed costs. If milk prices fall, beef prices fall, or feed costs rise, the expansion of losses in subjects related to fair value of biological assets will encroach on the profit center and hurt farmers. This round of milk price adjustments began in September 2021. It took a long time and was significant. The highest drop during this period reached 30.8%. Contract milk prices fell from a high of 4.37 yuan/kg in August 2021 to a low of 3.02 yuan/kg. The growth rate of Youran Animal Husbandry declined significantly from around 2022, and profits became losses around 2023.
Compared to small to medium ranches, large-scale ranches are relatively more resistant to the head cycle. 1) Large-scale ranches are deeply tied to leading dairy companies to guarantee raw milk sales, and contract milk purchase prices fluctuate with the market; 2) Empowered by the group's resource advantages, the ranch has more spare time to improve yield efficiency and feed utilization, and strengthen operating efficiency. At the same time, reserve cows are also being converted to cows one after another. The proportion of adult cows continues to increase, and yield growth is driven by increased yield; 3) The “breeding - feed - breeding” layout buffers the entire life cycle cost per kilogram of milk and is manageable. Cost risk and reduced cost sensitivity; 4) More advantageous in terms of management ability and efficiency , the ability to control expenses is stronger; 5) Free cash flow has improved, financing costs have decreased, debt burdens have gradually been reduced, and the overall risk is relatively manageable.
Meat and milk cycles resonate, farm profits have improved significantly, and elasticity is outstanding
Since July 2026, milk prices have risen slightly from the bottom, driven by seasonal factors such as heat stress and alfalfa storage. The contract milk price in October 2026 was 3.10 yuan/kg, slowly rising from the low of 3.02 yuan/kg in April. Looking ahead to the fourth quarter and 2027, the domestic beef cattle price increase cycle is expected to continue, the contribution of deep milk processing to raw milk digestion will increase, and the balance between raw milk supply and demand will be established. The bank determined that milk prices will rise moderately, mainly due to weak recovery in demand, a high degree of large-scale upstream ranching and a gradual increase in the share of deep processing, and supply-side changes will not be carried out in a drastic manner.
The beef cow cycle continued to be interpreted, and milk prices bottomed out and picked up moderately. Excellent animal husbandry turned losses and entered the profit release channel in the first half of 2026, mainly due to: 1) herd structure optimization and yield increase to drive yield growth, and deep binding with leading dairy companies to guarantee sales channels, precise nutrition and lean management reduce unit costs, and jointly cushion milk price adjustment pressure; 2) Beef cattle cycle growth is strong. At the same time, the number of cows hunted down and the overall marginal increase in cattle rushing revenue; 3) The decline in milk prices mitigates future marginal revenue growth Expected downward pressure, yield increase, unit feed cost optimization Together with the recovery in cattle rushing prices, valuation inputs have been improved, and losses related to biological assets have been significantly reduced.
Risk Alerts
The risk of large fluctuations in feed prices, the risk of animal diseases, and downstream demand falling short of expectations.