Dairy stocks saw broad gains before noon. At the time of writing, YOURAN DAIRY (09858) rose 5.74% to HK$3.13, CH MODERN D (01117) gained 3.36% to HK$1.23, CHINA FEIHE (06186) climbed 1.95% to HK$4.18, and CHINA SHENGMU (01432) added 1.59% to HK$0.32.

Guosheng Securities noted in a research report that raw milk prices, after a four-year downtrend, have recently stabilized temporarily. The national average price in major producing regions increased from RMB 3.02/kg in early August to RMB 3.04/kg by late September, while spot prices in Ningxia rose from RMB 2.1-2.2/kg to RMB 3.5-3.7/kg. This rebound was driven by seasonal demand for Mid-Autumn Festival and National Day gifts, as well as reduced supply due to "heat stress" on dairy cows from July to September.

The report suggests that milk prices are nearing the end of their downtrend, and with accelerated herd reduction, a turning point may be approaching. However, given the rising proportion of large-scale farms, price fluctuations are expected to moderate. For dairy companies, narrowing price declines and reduced losses from culling cattle could lead to profit recovery in financial statements.

Meanwhile, TF Securities pointed out that since September, despite pre-holiday restocking and school milk production driving spot price rebounds in some regions, overall milk prices in major producing areas remained stable. Current prices remain below cost levels, with persistent industry losses and funding pressure from silage costs. Capacity reduction continues, with the dairy herd declining 0.18% month-on-month in September (compared to a 0.2% drop in August), bringing cumulative reduction to around 8%.

The firm believes that while holiday demand provides short-term support for milk prices, the industry's capacity reduction trend persists. Once seasonal consumption weakens, the destocking process may proceed without excessive concerns. With capacity reduction likely nearing its end, a cyclical turning point in milk prices is anticipated.