Morgan Stanley: Dong-E-E-Jiao (000423) Inner Mongolia Site Visit
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Morgan Stanley recently conducted a site visit to Dong-E-E-Jiao's Inner Mongolia facility, concluding that the company is gradually resolving its donkey hide supply bottleneck through self-built breeding bases and cooperative ranches. Capacity utilization at the Inner Mongolia plant has reached 70%, notably above the industry average of 50%. Management targets a donkey hide self-sufficiency rate of 30% by 2026, doubling from 15% in 2023. Self-built bases currently house around 50,000 donkeys, complemented by 30,000 from cooperative ranches.
This improved upstream integration has reduced donkey hide procurement costs by 5% year-over-year, benefiting margins. The company maintained stable factory prices for its core Ejiao block products without adjustments. Financially, 2025 revenue grew 12% year-over-year with net profit rising 15%. Management projects 2026 revenue growth of 10-12% and net profit growth of 12-15%. A second phase at the Inner Mongolia plant has commenced, with operations expected in 2027 to expand total capacity by 30%.
The competitive landscape is improving as smaller peers exit due to raw material cost pressures. Morgan Stanley maintains an Overweight rating on Dong-E-E-Jiao with a target price of RMB 65, based on 25 times 2026 forecast price-to-earnings. Key risks include donkey hide price volatility, potential livestock disease outbreaks, and softer consumer demand.
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