Xinjiang's largest raw milk supplier, capacity further released. The company has 9 farms of its own scale (about 20,000 cows and more than 120 tons of milk per day) and 13 participating farms (about 30,000 cows, producing more than 100 tons of milk per day, which may increase by 50,000 in the future). The company has agreed with local farmers about 30,000 cows (producing more than 100 tons of milk per day). Most of the dairy cows introduced in the early days of the participating farms are young dairy cows, which entered the production peak in the second half of 2016 and 2017, and the company's milk production is expected to increase by 100-200 tons per day in 2017.
Subsidiaries Garden Dairy and Ximu Dairy have only two licenses for the production and sales of infant formula in Xinjiang. Garden Dairy products are mainly sold in Xinjiang, with a production capacity of about 45000 tons of dairy products such as pasteurized milk and milk powder, and revenue reached an all-time high in the first 10 months of 2016. Ximu Dairy focuses on the non-Xinjiang market and is the main platform for the company to establish marketing channels and build well-known dairy brands with foreign partners in the future.
With the reduction of supply and the recovery of demand, there is a high probability that international raw milk prices will continue to rise. Since 2006, the international raw milk price has experienced three complete cycles. At present, the international raw milk price is in the initial rising stage of a new cycle. As a result of early dairy farming losses, production in the world's five major dairy exporters continues to decline, dairy exports are declining, while global demand is slowly recovering, international milk prices are likely to continue to rise.
Domestic raw milk prices will meet the inflection point, milk powder registration system and baby boom to promote the supply and demand pattern of infant milk powder market. The rise in domestic raw milk prices generally lags behind international raw milk prices for half a year to one year. Domestic raw milk prices are likely to usher in an inflection point in the first half of 2017, which will first benefit raw milk suppliers. As a result of the milk powder registration system, 75% of the existing infant milk powder brands have to withdraw from the market and increase the concentration of the industry. The baby boom and the second-child policy in the 1980s will trigger a new round of baby boomers, and demand for infant milk powder is expected to increase from 2017.
Profit Forecast: excluding government subsidies for the time being, the company's 2016 / 2018 EPS is expected to be-0.15max 0.11max 0.26 yuan. The company has a large number of fine quality pastures, which is the only raw milk standard of A shares, and will benefit first under the rising milk prices at home and abroad and national reform. The company's market capitalization is small, the performance is flexible, and it is given a "recommended" rating, with a reasonable share price range of 21-22 yuan.
