New stock preview | When the dairy industry giants slow down, how does Junlebao use the "Fresh" strategy to impact the Hong Kong stock market?

The melamine incident in 2008 was a key turning point in the development of the Chinese dairy industry. It profoundly reshaped the industry's competitive landscape, regulatory framework, and consumer trust system. As one of the brands associated with the core company involved in the incident, Yili's subsequent development path has become a sample for observing the industry's evolution. Yili Dairy Group Co., Ltd. (hereinafter referred to as "Yili") submitted its application for listing on the main board of the Hong Kong Stock Exchange, with CICC and Morgan Stanley as its joint sponsors. This marks a new phase in its development. The considerations for this capital operation are closely related to the industry environment and its own strategic adjustments. On the one hand, the competition in the domestic dairy market continues to intensify, and cost pressures are emerging in the upstream of the industrial chain; on the other hand, the trend of consumer upgrading has created opportunities for niche markets. Against this backdrop, Yili's high-end fresh milk brand "Joyday" has shown outstanding market performance in recent years. Its use of sterilization technology and marketing of the concept of "freshness" has successfully entered the rapidly growing high-end liquid milk market, becoming one of the key drivers of the company's revenue growth. Significant results in high-end development and steady performance According to the prospectus, Yili, as an innovation-driven comprehensive dairy company, has a clear market position and strategic layout. The company ranks third in the comprehensive dairy market in China, with a market share of 4.3%, and its core competitiveness is built on a diversified product matrix and an integrated industrial chain foundation. In terms of business structure, the company's growth is mainly due to its leading position in the high-growth low-temperature liquid milk sector. This segment market is expected to maintain a compound annual growth rate of 7.2% in the coming years, and Yili's two star brands, "Joyday" and "Pure & Sure", respectively, hold the first position in the low-temperature yogurt and high-end fresh milk segments.2024.0% These growth figures highlight Yili's ability to adapt to changing consumer demands. From the launch of the zero-sugar yogurt "Pure & Sure" in 2017 to the focus on the high-end fresh milk market with "Joyday" in 2019, and the recent expansion into bakery and tea shop channel business, the company has shown strong product innovation and category management capabilities. This strategic layout has translated into a clear revenue structure. Low-temperature liquid milk products are the company's strongest growth engine, with their revenue share significantly increasing from 35.9% in 2023 to 42.5% in the first nine months of 2025. Among them, low-temperature yogurt has performed well, accounting for 27.6% of the business in the first nine months of 2025, contributing significantly to the growth. The fresh milk business has also grown rapidly, with its share in the first nine months of 2025 increasing to 10.7%, demonstrating the effectiveness of the high-end strategy. The infant formula business, as the company's second-largest pillar, has maintained a stable revenue share of 27.1% in 2024, providing a consistent and robust foundation for the company. In addition, the other dairy products aimed at the catering channel, while currently a small percentage, are continuously expanding, indicating the company's active positioning in the B-side market and the potential for opening up new growth curves in the future. However, the stability of profitability needs to be observed. The gross profit margin for the first nine months of 2025 was 32.0%, down from 34.7% in the same period of 2024, which may indicate cost or pricing pressures in the high-end process, as competition intensifies. Continuous industry demand growth against intensified differentiation Looking at the industry, compared to developed markets, the Chinese dairy industry started relatively late, but under the continuous promotion of modernization of the industrial chain and efficient integration of the supply chain, it has rapidly caught up. Driven by urbanization, increased health awareness, and product innovation, the market is expected to maintain a stable growth trend. Liquid dairy products are the largest segment in the Chinese dairy market, accounting for 54.3% of retail sales in 2024, with a market size of 355 billion yuan. Among them, low-temperature liquid dairy products (mainly fresh milk and low-temperature yogurt) have shown significant structural growth potential. From 2019 to 2024, the market size of low-temperature liquid dairy products increased from 77.4 billion yuan to 89.7 billion yuan, with a compound annual growth rate of 3.0%, higher than the overall liquid dairy products growth rate of 1.7%, and its market share also increased from 23.7% to 25.3%. It is expected that by 2029, the market size of this segment will further reach 125.9 billion yuan, with a compound annual growth rate of 7.2% from 2025 to 2029, and its market share is expected to increase to 31.8% of the liquid dairy products market. However, the market penetration rate of low-temperature liquid dairy products in China is still much lower than that of the US and Japan, indicating considerable room for future growth. Analytically, although market demand is steadily growing, the Chinese dairy industry has transitioned from a period focused on achieving quantity growth to a new stage driven by diversified and refined demand, known as "quality improvement". "Structural growth" is replacing "universal growth". Observations show that on the one hand, cost pressures continue. High prices for upstream feeds, energy, and rigid investments in the construction and operation of large-scale farms have created a heavy burden on the entire industry chain. On the other hand, competition is intensifying in every price segment and channel. In the basic room temperature milk market, price wars are still the common means of clearing inventory and fighting for market share; in high-growth and high-margin areas such as low-temperature fresh milk and high-end yogurt, competition is more multifaceted - national giants accelerate their penetration through advantages in branding and channels, while regional dairy companies rely on the efficiency of their supply chain and local customer loyalty to hold their ground. In addition, cross-promotional beverages such as boutique coffee and new tea drinks are constantly diverting consumer spending and attention on drinks. Against this backdrop, relying solely on the story of "high-end" or "category innovation" may no longer be sufficient to support sustainable growth in performance. The market's questions to companies are becoming more specific: can companies establish true brand premiums and consumer stickiness on high-end products, rather than relying solely on short-term marketing drives? Can they digest cost pressures and improve overall profitability through refined supply chain management and channel operations? In conclusion, Yili's move to impact the Hong Kong stock market listing is not only a summary of its years of transformation and upgrading but also a key layout for responding to the new normal of the industry. The prospectus presents an image of a growth-oriented dairy company that excels in establishing advantages in niche segments, deep integration of the industrial chain, and breakthroughs in profitability. However, faced with high costs, intensified competition, and diversified consumer preferences, the real test has just begun. Whether the short-term rebound in performance can be transformed into long-term competitive barriers depends not only on continuous investments in technology and channels but also on building true brand values and user stickiness beyond labels such as "fresh," "healthy," and "high-end." If successful, Yili may not only win the approval of the capital market but also write a new chapter for itself in China's dairy industry as it moves towards high-quality development.