Haitong International has released a research report forecasting that CH MODERN D (01117) will achieve revenues of RMB 158.5 billion, RMB 164.0 billion, and RMB 172.2 billion for the years 2026 to 2028. Net profit attributable to shareholders is projected to be RMB 8.1 billion, RMB 14.2 billion, and RMB 19.2 billion, respectively, with corresponding earnings per share (EPS) of RMB 0.10, RMB 0.18, and RMB 0.25. The EPS forecast for 2026 remains unchanged, while the 2027 estimate has been revised upwards from RMB 0.14.
Based on the valuation levels of comparable companies and the firm's leading position in the upstream dairy sector, the brokerage has assigned a target price-to-earnings (PE) ratio of 16x for 2026, increased from a previous multiple of 13x. Consequently, the target price has been raised from HK$1.3 to HK$1.8, assuming an exchange rate of 1 CNY to 1.15 HKD. Haitong International maintains an "Outperform" rating, citing the company's status as a leader in the raw milk industry, signs of a cyclical bottom, synergies from both dairy and meat cycles, significantly reduced impairment pressures, and strong cash flow.
Key points from the report are as follows: Full-year revenue reached RMB 126.0 billion, with a sequential improvement in the second half of 2025, indicating a clear cyclical bottom and sustained operational resilience. After excluding non-cash items such as changes in the fair value of biological assets, core profit before impairments was RMB 19.1 billion, showing substantial year-on-year improvement. Cash EBITDA hit a record high of RMB 30.6 billion, up 2.6% year-on-year, while operating cash flow reached RMB 25.0 billion, also a new peak, highlighting robust core profitability and cash flow metrics.
The core business strategy of volume growth compensating for price pressures resulted in raw milk revenue of RMB 104.7 billion, a slight increase of 0.1% year-on-year, with sales volume rising 8.5%. The cost per kilogram of milk sold was RMB 2.3, and feed cost was RMB 1.8, down 8.3% and 9.2% year-on-year, respectively, supporting a stable raw milk gross margin of 31.2%. The overall gross margin improved to 27.4%. Both cash EBITDA and operating cash flow reached record levels, ensuring a strong cash safety cushion.
Herd structure optimization is progressing, with the total cattle inventory decreasing by 7.0% year-on-year to 457,000 head. The proportion of mature cows increased to 58.2%, and milk yield per cow reached 12.9 tons, reflecting significant gains in production efficiency. The full-year fair value loss on biological assets was RMB 31.1 billion, which included a one-time culling loss of RMB 3 billion. Losses narrowed considerably in the second half, indicating that non-cash disruptions are gradually subsiding. The farming solutions business was strategically scaled back to focus on high-quality clients, leading to improved operational efficiency and a gross margin increase to 9.0%, signaling ongoing business structure optimization.
Industry supply and demand are rebalancing, with a recovery inflection point expected in 2026. Continued destocking domestically is likely to lead to a rebound in raw milk prices in the second half of the year. Rising prices for culled cattle are creating a positive synergy between the dairy and meat cycles. The company has locked in prices for soybean meal for the first half of the year, aiming to reduce target feed costs below RMB 1.8 per kilogram. Capital expenditure decreased by 29.3% year-on-year, and free cash flow is projected to improve. Combined with potential acquisitions such as Shengmu, the company has ample potential for earnings growth.
Risk factors include potential increases in commodity prices and a slower-than-expected recovery in downstream demand.