Shanghai Milkgroud Food Tech: Earnings inflection increasingly visible; upgrade from Neutral to Buy

Research evidence excerpt

Shanghai Milkgroud Food Tech: Earnings inflection increasingly visible; upgrade from Neutral to Buy

emand and

improving execution. In our view, the broad-based strength across channels signals that Milkground

has entered a new phase of sustainable growth, marking a clear earnings inflection point for the

business.

EVIDENCE We are seeing an acceleration in the substitution of imported cheese products with domestically

produced alternatives in the B2B channel, driven by the widening cost advantage of domestic raw

milk relative to imported supply. As local manufacturers continue to improve product quality and

expand production capacity, we expect this import-substitution trend to persist, creating a

meaningful growth opportunity for Milkground. H126 revenue reached Rmb3.3bn, up 28.7% YoY,

with the B2B and B2C segments delivering over 20% YoY sales growth.

WHAT´S PRICED IN? We believe the market has yet to fully price in Milkground's earnings recovery. The stock is trading at

30x/23x 2026/27E P/E, which we view as attractive given its c40% recurring EPS CAGR over 2025-

27E, implying a 0.7x 2026E PEG. This compares favorably with the valuations of new consumer peers,

despite Milkground's improving growth profile, accelerating earnings trajectory and increasing

visibility on profit delivery under the new management team.Please

Upside/Downside

Spectrum

Valuedrivers (2026E) YoY cheese sales growth Cheese gross margin S&D expense ratio

Rmb30.20 upside 30.0% 34.2% 16.9%

Rmb25.50 base 26.9% 33.6% 17.0%

Rmb16.50 downside 22.0% 33.3% 17.2%

Source: UBS estimates

Company Description Shanghai Milkground Food Tech (Milkground) is the only A-share listed company with cheese as its

core business. Milkground's business comprises cheese (81.9% of 2025 revenue), liquid milk (6.5%)