According to the Zhitong Finance APP, Guosheng Securities released a research report stating that on July 28, the national childcare subsidy system implementation plan was announced. Infant formula is expected to benefit first from childcare subsidies and other fertility policies. The number of newborns in the Year of the Dragon in 2024 is expected to increase by 520,000 year-on-year to 9.54 million, driving positive growth in first-stage formula in 2024, and it is anticipated that this will lead to increased demand for second-stage formula in 2025. According to Nielsen data, infant formula sales in Q1 2025 increased by 2.3% year-on-year, significantly accelerating compared to a cumulative year-on-year decrease of 0.9% from Q2 2024 to Q1 2025. If childcare subsidies and related policies are implemented, it is expected to catalyze an increase in newborns, driving up the demand for infant formula.

Guosheng Securities' main viewpoints are as follows:

Event: On July 28, the national childcare subsidy system implementation plan was announced, which will provide subsidies for children under three years old starting from January 1, 2025, until they reach three years old, with a subsidy of 3,600 yuan per child per year. For infants born before January 1, 2025, who are under three years old, the subsidy will be calculated based on the number of months eligible for subsidy.

Childcare subsidies drive support, improvement in fertility rate is expected

This childcare subsidy can be received for one-child, two-child, and three-child families, achieving comprehensive coverage of family support under the three-child policy, and including one-child families in the subsidy scope. It is expected to gradually drive improvement in the fertility rate, and the nationwide unified standard may have a more pronounced impact on lower-tier cities. Meanwhile, local governments can introduce differentiated subsidy policies based on local economic levels. It is estimated that for newborns from 2022 to 2024, a total subsidy of 156 billion yuan is expected, and for newborns born after January 1, 2025, a subsidy of 10,800 yuan per person is expected.

Infant formula benefits first from fertility catalysis, demand for infant formula is on the rise

Infant formula is expected to benefit first from childcare subsidies and other fertility policies. The number of newborns in the Year of the Dragon in 2024 is expected to increase by 520,000 year-on-year to 9.54 million, driving positive growth in first-stage formula in 2024, and it is anticipated that this will lead to increased demand for second-stage formula in 2025. According to Nielsen data, infant formula sales in Q1 2025 increased by 2.3% year-on-year, significantly accelerating compared to a cumulative year-on-year decrease of 0.9% from Q2 2024 to Q1 2025. If childcare subsidies and related policies are implemented, it is expected to catalyze an increase in newborns, driving up the demand for infant formula.

China Feihe (06186): It is expected to achieve revenue of 9.1 to 9.3 billion yuan in H1 2025. The company expects to complete channel inventory adjustments in Q3 2025, with an expected low single-digit growth in annual revenue.

Yili Co., Ltd. (600887.SH): In 2024, Yili's revenue from milk powder and dairy products is expected to reach 29.68 billion yuan, a year-on-year increase of 7.5%, with an infant formula market share of 17.3%. In Q1 2025, revenue from milk powder and dairy products increased by 18.6% year-on-year, achieving growth through product upgrades and channel expansion.

Mengniu Dairy (02319): In 2024, Mengniu's milk powder business is expected to achieve revenue of 3.32 billion yuan, a year-on-year decrease of 12.7%. The revenue of Ruiboon achieved double-digit growth, with market share improvement through R&D innovation and channel transformation.

H&H International Holdings (01112): In H1 2025, infant formula sales achieved high single-digit growth year-on-year, with the market share of Biostime in the ultra-high-end market in mainland China increasing from 13.0% in 2024 to 15.8% in May 2025 Dairy Product Price Decline Narrows, Differentiated Development in Low Temperature

According to Mashangying data, in Q2 2025, the sales of ambient white milk and ambient yogurt decreased by 14.4% and 18.9% year-on-year, respectively, while the sales of low-temperature white milk and low-temperature yogurt increased by 19.4% and 3.3% year-on-year, respectively. Ambient products are generally under pressure, while low-temperature products show a clear growth trend driven by product upgrades, indicating a trend of differentiated development in the industry. Currently, with the support of parenting policies, if the birth rate increases, it is expected to lead to an increase in the number of infants, which may drive an increase in dairy product consumption. Yili Co., Ltd. and Mengniu Dairy have formed a low base due to inventory reduction in Q2 2024, and it is expected that the shipment side will perform better than the terminal side. New Hope Dairy (002946.SZ) is launching new products and expanding channels, while also focusing on the development of core low-temperature categories, with significant α growth expected to outperform peers.

Risk Warning

Limited short-term increase in birth rates, intensified industry competition, and food safety issues