China Dairy Sector: H126/Q226 preview: raw milk prices near an inflection point; earnings recovery gaining traction in H126

Research evidence excerpt

China Dairy Sector: H126/Q226 preview: raw milk prices near an inflection point; earnings recovery gaining traction in H126

Global Research

7 July 2026ab

First Read

EquitiesChina Dairy Sector

H126/Q226 preview: raw milk prices near an China

inflection point; earnings recovery gaining Consumer, Non-Cyclical

traction in H126 NinaAnalystJiang

nina.jiang@ubs.com

+852-2971 5681

Christine Peng, CFADairy sector: signs of recovery

Analyst

Liquid milk demand showed early signs of recovery in H126 with raw milk prices christine-y.peng@ubs.com

gradually stabilizing following an extended industry downturn. We expect the sector's +852-2971 7571

recovery trend to continue into Q2, although revenue growth is likely to moderate

Steven Dang

slightly from Q1 levels due to a less favorable comparison base following the Chinese Associate Analyst

New Year timing shift. Raw milk prices in major producing regions averaged steven.dang@ubs.com

approximately Rmb3.0/kg in H126 with procurement prices from small-scale farms +852-3-712 2195

gradually converging toward the same level. The stabilization in raw milk prices should

materially reduce inventory write-downs and biological asset impairment losses across

the dairy value chain, providing support to sector earnings.

Mengniu: earnings recovery supported by improving fundamentals

We expect Mengniu's revenue to grow at a high-single-digit rate in H126, driven by a

continued recovery in core dairy consumption and strong performance from emerging

businesses. By segment, we estimate liquid milk revenue to grow at mid-single-digit

rates while milk powder/ice cream/cheese revenue to increase by approximately 30%/

HSD%/20-30% YoY. At the margin level, we expect OPM to decline slightly YoY,