[Zheshang Food & Beverage] Continue to Strongly Recommend the Dairy Products Sector (260728)

English summary

Sector view: We expect the overall dairy market decline to narrow in 2026, and leading dairy companies' liquid milk revenue may turn positive. Since the beginning of the year, channel health has improved significantly and price levels have shown signs of recovery. #The sector's stabilizing and improving trend is established.# Regarding milk price trends, bulk milk prices have already begun to rebound, while contract milk prices have remained basically stable since the beginning of the year. It is expected that with improved supply-demand structure, milk prices will show a moderate upward trend. Coupled with the potential release of capacity in dairy deep-processing business, #this will help move the raw milk cycle toward supply-demand balance.# We believe: (1) For #upstream farms#, more attention should be paid to marginal catalysts in the beef price cycle logic. We recommend Youran Dairy and Modern Dairy; (2) For #downstream dairy products#, from a growth perspective, we recommend New Hope Dairy; from an elasticity perspective, we focus on Mengniu; from a fundamental recovery plus high dividend perspective, we recommend Yili; and we note the potential elasticity of Miaokete. Sun Tianyi