Bright Dairy has recorded posted 2025 revenue/attributable net profit/recurring net profit of RMB23.90bn/-149mn/-60mn (-1.6% YoY/both turning to losses YoY). For 4Q25, revenue declined by 3.4% YoY to RMB5.66bn, with the attributable net profit at -RMB240mn (turning to a loss YoY) and the recurring net profit at -RMB220mn (the loss widening YoY). Results fell within the guided range of RMB-180mn to RMB-120mn (for attributable net profit) and RMB-100mn to RMB-40mn (for recurring net profit). The liquid milk and dairy farming operations came under pressure from external challenges and a trough in the raw milk cycle. On the bright side, other dairy products achieved positive revenue growth in 2025. The attributable net loss stemmed primarily from Synlait’s operational deficits, but management notes that these production issues have largely been resolved, according to company disclosures. Maintain OVERWEIGHT, considering the company’s ‘freshness strategy’ and nationwide expansion of refrigerated dairy products.
Other dairy products fared well while other products declined
By product category, liquid milk/other dairy products/farming products generated revenues of RMB13.22/8.47/0.91bn in 2025 (-6.7/+8.7/-11.2% YoY), with the 4Q25 figures at RMB3.08/2.30/0.20bn (+0.3/+5.5/-6.2% YoY). Liquid milk demand remained sluggish with milk prices under pressure, while other dairy products non-Shanghai/overseas markets recorded revenues of RMB6.11/10.01/7.65bn in RMB0.91/2.61/2.14bn (-30.8/+12.6/-1.2% YoY). In terms of channels, direct sales/distributors/other channels contributed revenues of RMB4.94/18.70/0.12bn in 2025 (-2.2/-1.5/+5.6% YoY), with the 4Q25 figures at RMB0.99/4.65/0.03bn (-8.9/-1.1/+71.7% YoY). Looking ahead, we think that the company’s distributor optimization and ‘quality-quantity synergy’ strategy, coupled with its development of emerging channels (including beverage chains and instant retail), should drive incremental revenue growth.
Gross margin and attributable net margin both contracted YoY
The gross margin fell by 2.0pp YoY to 17.3% in 2025 (4Q25: 16.0%, -3.1pp YoY), as raw milk cost benefits partially offset competitive pricing pressures. The company demonstrated effective cost discipline, with the selling/administrative expense ratios declining by 0.3/0.3pp YoY to 12.0/3.4% (4Q25: 13.4/4.1%, -1.6/ +0.2pp YoY). The attributable net margin deteriorated by 3.6pp YoY to -0.6% (4Q25: -4.2%, -14.5pp YoY), primarily due to Synlait’s operational issues. Synlait (65.25% owned by the company) recorded an operating loss for the year due to production disruptions, which led to inventory write-offs and elevated production costs. Management confirms that these issues have been largely resolved, according to company disclosures.
Earnings forecasts and valuation
Given the slower dairy demand recovery than we expected, we lower our 2026/2027 revenue forecasts to RMB24.31/25.30bn (-5/-5% vs our prior estimates). Intensified near-term competition prompts us to reduce our gross margin assumptions. We thus revise our 2026/2027 attributable net profit estimates to RMB482/664mn (-27/-7% vs our prior estimates), and introduce our 2028 forecast of RMB715mn, with EPS of RMB0.35/0.48/0.52. We roll forward our valuation to 2027 metrics given the lingering farming segment drag. Applying the average for the company’s peers of 17x 2027E PE on Wind consensus, we derive our new target price of RMB8.16 (from RMB9.90 based on 25x 2025E PE). Maintain OVERWEIGHT.
Risks: raw-material price volatility; heightened industry competition; food-safety incidents.