Southern Dairy Industry passes IPO review on Beijing Stock Exchange: Difficult to break regional brand dilemma, growth prospects to be tested

Ask AI · How Can Nanfang Dairy Break Free from Regional Market Dependence to Achieve Growth?

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Blue Whale News, March 20 (Reporter He Tianjiao) On March 18, the results of the 27th review meeting of the 2026 Listing Committee of the Beijing Stock Exchange were released: Guizhou Nanfang Dairy Co., Ltd. (hereinafter referred to as “Nanfang Dairy”) met the issuance requirements, the listing conditions, and the information disclosure requirements, successfully passing the review. At this point, after nearly three years of pursuing an IPO, undergoing two rounds of inquiries by the Beijing Stock Exchange, and significantly cutting the amount of funds to be raised before approval, Nanfang Dairy is only one step away from landing on China’s A-share capital market. However, the parent company of “Guizhou Shanhuahua,” faces serious challenges in terms of regionalization, growth sustainability, and its milk-source strategy.

Fundraising amount was cut drastically; after two rounds of inquiries by the Beijing Stock Exchange

The prospectus shows that Nanfang Dairy is mainly engaged in the manufacturing and sales of dairy products and milk-based beverages. During the reporting period, the company integrated R&D, production, sales, and dairy livestock breeding of dairy products and milk beverages. Its主要 products include various low-temperature dairy products (pasteurized milk, fermented milk, low-temperature formulated milk), room-temperature dairy products (sterilized milk, formulated milk), milk-based beverages, other dairy products, and fresh milk, among others.

Currently, the company has dairy product brands such as “Shanhuahua,” “Huatou Ranch,” “Huaxi Old Sour Milk,” and “Guicao.” For this IPO, Nanfang Dairy plans to publicly issue no more than 35.1852 million shares and raise RMB 550 million, to be used for the construction project of the Nanfang Dairy cattle breeding base in Weining County and the marketing network construction project of Guizhou Nanfang Dairy Co., Ltd. It plans to use RMB 400 million and RMB 150 million from the raised funds, respectively.

It is worth noting that in the company’s previously submitted application, Nanfang Dairy planned to raise RMB 980 million. Of this, the marketing network construction project would invest RMB 480 million, meaning the difference from the version submitted for the board review was as large as RMB 330 million. In addition, the application also included a RMB 100 million project to replenish working capital, which was removed in the version reviewed for the meeting.

Behind the sharp reduction in the fundraising amount were the two rounds of inquiries by the Beijing Stock Exchange, whose questions directly targeted core issues such as the milk-source supply chain, dependence on regional markets, losses at subsidiaries, and the reasonableness of the fundraising.

In fact, Nanfang Dairy’s IPO journey has not been smooth. Nanfang Dairy began its listing process at the beginning of 2023, initially targeting the main board of the Shanghai Stock Exchange. However, due to tighter main-board listing policies, it switched to listing on the National Equities Exchange and Quotations (NEEQ, i.e., China’s New Third Board) at the end of 2023. In 2024, Nanfang Dairy completed a change in its listing board and officially launched a push for the Beijing Stock Exchange. In June 2025, its IPO application was accepted by the Beijing Stock Exchange. After two rounds of inquiries by the Beijing Stock Exchange, its IPO entered the stage of review at the meeting.

Breaking the pattern of regional dairy companies is difficult; growth prospects remain to be tested

The hardship of the IPO journey is closely tied to its development situation. Song Liang, a senior analyst in the dairy industry, told reporters from Blue Whale News that as a regional dairy enterprise, with giants such as Mengniu and Yili exerting strong control over the market, its room for development is being squeezed, making it difficult to break out of the Guizhou market. Even the Beijing Stock Exchange has raised doubts about the company’s future growth space. In a recent inquiry letter, it stated: “Is the company’s market space within Guizhou Province close to saturation? Are there significant difficulties or obstacles to expanding its markets outside Guizhou Province?”

In its prospectus (the version submitted for the meeting), Nanfang Dairy said that as the “leading” dairy enterprise based in Guizhou, the company’s growth and expansion have taken place within the Guizhou market, and its products hold a relatively high market share within Guizhou Province. Although in recent years the company has actively expanded into markets outside Guizhou Province—its products have been promoted to surrounding provinces and cities including Hunan, Sichuan, Chongqing, Guangxi, Yunnan, and Guangdong—at present, revenue from its products remains highly concentrated in Guizhou Province. The proportion of main business revenue from within Guizhou Province exceeds 90%.

The impact on growth potential is also reflected in performance. The prospectus (the version submitted for the meeting) disclosed that from 2022 to 2024, and January to June 2025, Nanfang Dairy achieved operating revenue of RMB 1.575 billion, RMB 1.805 billion, RMB 1.817 billion, and RMB 854 million, respectively; net profits attributable to owners of the parent company were RMB 173 million, RMB 200 million, RMB 210 million, and RMB 123 million, respectively. Although the company’s operating revenue and net profit are still growing, the growth rate has begun to slow down. In 2023, operating revenue grew year-on-year by 14.6%; in 2024, it fell sharply to less than 1%. Net profit growth similarly dropped sharply—from 15.6% in 2023 to 5.0% in 2024.

“Compared with national dairy companies such as Yili Co., Ltd. and Mengniu Dairy, the company’s brand is not well known in national markets, and the brand’s influence is relatively limited across the national market. Expanding the company’s business in markets outside the province not only requires targeted product R&D, logistics, and the development of a network of distributors and sales teams, but also requires some time and marketing accumulation to continuously improve brand awareness—these all impose higher requirements on the company’s overall capabilities. If, in the future, the company faces weak market development or if existing market demand declines, it will adversely affect the company’s future profitability. In addition, the relatively high proportion of regional sales markets may also bring certain risks to the company’s operations. If the conditions of the regional markets covered by the company change and the company is unable to make corresponding adjustments in a timely manner, it will adversely affect the company’s operating performance in the short term.” Nanfang Dairy said.

Of course, Nanfang Dairy is not without room for development. Song Liang said that Nanfang Dairy can focus on developing the provincial market. On the one hand, in Guizhou, with its diversified culture and complex geography, local brands have cultivated themselves locally for years and have strong brand influence, while national large brands pose less of a threat to local brands. On the other hand, as the future market accelerates “de-concentration,” consumers’ individualized needs increase, and channels become fragmented and products become more scenario- and personalized—trends that create opportunities for further development of regional brands. But overall, achieving a large leap in growth potential is limited.

Ranch building once resulted in losses; costs were inverted

The main purpose of this Nanfang Dairy fundraising is the construction project of the Nanfang Dairy dairy cattle breeding base in Weining County. However, in terms of building ranches, Nanfang Dairy has not been very smooth.

Starting in 2022, to further ensure the stability of the quantity and quality of milk source supply, Nanfang Dairy continuously developed its own milk source and successively controlled Dan Sheng Animal Husbandry, De Lian Animal Husbandry, and Long Qian Animal Husbandry. As a result, the company’s self-produced fresh milk output increased rapidly from 82,466 tons in 2022 to 100,169.24 tons in 2023, and its proportion rose from 55.51% to 60.76%. However, in 2024, these three controlling subsidiaries whose main business is ranching saw collective losses, which attracted inquiries from the Beijing Stock Exchange.

Nanfang Dairy explained that the losses at the three controlling subsidiaries in 2024 were reasonable. During the reporting period, domestic fresh milk prices continued to decline, especially with widespread losses in the dairy cattle breeding industry in 2024. Due to the continued decline in the market selling prices of culled cows, losses related to the subsidiaries’ culled cows increased. Long Qian Animal Husbandry built a ranch newly during the reporting period, and fixed-asset depreciation costs were high; the proportion of breeding cows was relatively low, leading to fixed cost per kilogram of milk being higher than the average level. At the same time, in 2024, the proportion of first-time calving cows was high, causing lower milk yield per milking cow, less milk volume, and lower operating revenue. Long Qian Animal Husbandry and Dan Sheng Animal Husbandry also incurred certain interest cost due to ranch construction and operating loans.

Nanfang Dairy stated that since 2025, the operating conditions of the three controlling subsidiaries have been steadily improving. In particular, since 2025, as the price of feed procurement has declined, the subsidiaries have continued to improve milk yield per dairy cow. Additionally, compared with the same period last year, the subsidiaries have reduced the disposal of culled items related to productive biological assets, among other reasons. As a result, De Lian Animal Husbandry turned from loss to profit in the first half of 2025.

In addition, the prospectus disclosed a unique phenomenon: due to the continuous decline in fresh milk market prices in recent years, the production cost of Nanfang Dairy’s own ranches is actually far higher than the price of purchased milk. In 2023, when the external market average price fell to RMB 3.83 per kilogram, the company’s cost of self-produced fresh milk was as high as RMB 4.76 per kilogram. Even in 2025, this price gap still exists.

Image source: Nanfang Dairy prospectus

Building ranches not only once led to losses, but also created a cost inversion. In such circumstances, the risk of continuing to invest in building ranches is self-evident. What is the significance of building its own ranches? On this, Song Liang believes: “Building its own milk source is the right approach. In the long run, China may face a shortage of milk, and milk-source prices are mainly controlled by leading companies. By arranging its milk source, Nanfang Dairy can ensure milk-source security within its own market regions.”

Looking ahead, Song Liang believes: “Nanfang Dairy should focus on the entire industrial chain. Facing the personalized and scenario-based demand for dairy products, seize the functional nutrition tailwind. Build its own system around product innovation and become a small-but-excellent dairy enterprise.”