Guotou International Securities: Downgrade Ausnutria (01717) to "Buy" rating, domestic milk powder business still under pressure.

Guotou Securities International released a research report stating that it has downgraded AUSNUTRIA (01717) to "Hold" rating. The population born in 2025 was 7.92 billion, a year-on-year decrease of 17%, with a birth rate of 5.63. Considering that the competition in the domestic infant formula industry is still intense, and there may be intensified competition next year, the bank expects the company's business to continue to be under pressure in the second half of the year. The bank has lowered the net profit for 2025/2026/2027 to 250/260/290 million yuan, corresponding to earnings per share of 0.16/0.16/0.18 Hong Kong dollars, and adjusted the target price to 2.3 Hong Kong dollars, which represents a 9% increase from the current stock price. The main viewpoints of Guotou International Securities are as follows: Significant decrease in the population born in 2025 The population born in 2025 was 7.92 billion, a year-on-year decrease of 17%, with a birth rate of 5.63. 2024 was the Year of the Dragon, so there was a slight increase in the number of births, reaching 9.54 million. Therefore, in the first half of 2025, there was a certain degree of competition easing in the infant formula industry. In the second half of 2025, with the gradual impact of the birth population, the industry will continue to face more intense competition and is expected to continue into next year. AUSNUTRIA achieved growth in the first half of the year Total revenue in the first half of the year was 3.89 billion yuan, a year-on-year increase of 5.6%; net profit was 181 million yuan, a year-on-year increase of 21.4%. The growth was supported by overseas sheep milk powder, with revenue of 1.86 billion yuan in the first half of 2025, a year-on-year increase of 3.1%. Revenue from overseas sheep milk powder was 480 million yuan, a year-on-year increase of 65.7%, accounting for 26% of sheep milk powder revenue, highlighting its importance. Domestic sheep milk powder and cow milk powder performance were under pressure. Domestic sheep milk powder revenue was 1.38 billion yuan, a year-on-year decrease of 8.9%. Revenue from cow milk powder in the first half of 2025 was 960 million yuan, a year-on-year decrease of 14.9%. The decline in sales was mainly due to the upgrade of the internal coding system in the second quarter and the proactive adjustment of channel inventory, resulting in a temporary reduction in shipments. In the second half of the year, facing the competitive situation in the industry, the bank expects sales of domestic business to remain under pressure. Product structure lowering gross profit margin The gross profit margin in the first half of 2025 was 41.9%, a year-on-year decrease of 1.5 percentage points. The gross profit margin of sheep milk powder decreased by 0.8 percentage points to 55.1%, and the gross profit margin of cow milk powder decreased by 0.8 percentage points to 52.3%. In the first half of the year, the promotion of internal coding products slightly lowered the gross profit margin of sheep milk powder and cow milk powder. As the promotion of internal coding products continues in the second half of the year, the bank expects further downward pressure on the gross profit margin, thereby lowering the expected full-year gross profit margin. Risk warning Decline in birth population; intensified industry competition; occurrence of serious food safety issues in the industry or company.