China Galaxy: CH MODERN D (01117) profit improvement is expected, rating upgraded to "Hold"

China Galaxy has released a research report on CH MODERN D (01117), upgrading its rating to "hold." China Galaxy believes that benefiting from optimized feed costs and rising raw milk prices, CH MODERN D is expected to achieve profit growth. Key points from China Galaxy's report: Feed costs decrease, boosting profit growth Benefiting from the fall in raw material prices, CH MODERN D's feed costs have significantly decreased. Management has indicated that by 2025, feed costs are expected to further drop to 1.8 yuan/kg, continuing to increase gross margin. China Galaxy predicts that CH MODERN D will achieve a year-on-year revenue growth of 1.6% in 2025, with a net profit expected to reach 217 million RMB. Supply-demand balance improvement, raw milk prices expected to rise According to data from the Ministry of Agriculture and Rural Affairs, as small-scale farms exit the market due to cash flow shortages, the total cow inventory has dropped below 6 million by early 2025. China Galaxy believes that farms will accelerate their exit in 2025, and with the improvement in supply-demand balance, raw milk prices are expected to increase year-on-year from the third quarter of 2025. CH MODERN D management anticipates that with multiple factors such as supply contraction, warming dairy consumption, and reduced import of powdered milk, raw milk prices will rise by 3% to 5% in 2026. Rating upgraded to "hold" Based on expectations of improved profit margin due to the decrease in feed costs, along with the trend of rising raw milk prices driven by supply contraction and demand recovery, China Galaxy has raised the target price for CH MODERN D to 1.31 Hong Kong dollars (from the original target price of 0.7 HKD) and upgraded the rating from "hold" to "hold."