2025 年 03 月 29 日 业绩短期承压，期待原奶价格回升 买入(首次) 事件 分析师：孙山山 S1050521110005 sunss@cfsc.com.cn 联系人：肖燕南 S1050123060024 xiaoyn@cfsc.com.cn 基本数据 | 当前股价 | （港元） | 1.13 | | --- | --- | --- | | 总市值 | （亿港元） | 89.4 | | 总股本 | （百万股） | 7,915.7 | | 流通股本 | （百万股） | 7,915.7 | | 52周价格区间 | （港元） | 0.6-1.31 | | 日均成交额 | （百万港元） | 8.6 | 市场表现 资料来源：Wind，华鑫证券研究 -10% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 现代牧业 恒生指数 相关研究 —现代牧业（1117.HK）公司事件点评报告 2025 年 3 月 25 日，现代牧业发布 2024 年年报。 投资要点 ▌ 利润短期承压，现金流表现较好 收入符合预期，非现金项目拖累利润。2024 年公司实现营收 132.54 亿元，同减 1.5%； ...

成本下降使毛利率及现金EBITDA改善，公允价值变动及商誉减值影响24年报表净利润 尽管受原奶售价下降影响，但受益于公斤奶饲料成本下降16.7%及单产提升带来的内生效益改善，24年 毛利率小幅扩张2.8ppt。得益于毛利率改善，公司24年现金EBITDA同增20%，表现良好。 行业存栏量开始持续去化，周期反转趋势未来利好龙头业绩改善。 根据草根调研，目前牧业85-90%面临亏损压力，行业存栏量于2024年3月已开始环比减少，24年行业存 栏量同比下降，25年1-2月延续去化趋势，该行预计2025年行业有望继续去化。根据统计局数据，2024 年我国牛奶产量4,079万吨，同比-2.8%，该行预计2024年国内原奶供需缺口或约为高单位数至10%左 右，考虑上游去化，该行预计2025年供需缺口有望改善、原奶价格或有望企稳，2026-2027年原奶价格 或有望逐渐进入上行周期。牧业目前处于周期底部，拉长周期看该行认为目前是左侧投资较好时间点。 公司单产延续提升，奶价降幅好于行业 受益于基因改良、技术提升等举措，2024年公司成乳牛单产同比小幅提升1.6%至12.8吨;2024年底公司 牛群规模49.1万头，剔除并表贡 ...

Summary of Modern Dairy's Conference Call Company Overview - **Company**: Modern Dairy - **Year**: 2024 - **Revenue**: RMB 13.254 billion, with a cash flow adjustment of RMB 2.986 billion, representing a year-on-year growth of 19.61% [3][4][7] - **Loss**: Reported a loss of RMB 1.469 billion due to non-cash items including a fair value loss of RMB 861 million and goodwill impairment of RMB 599 million [4][10] Key Financial Metrics - **Adjusted Operating Profit Margin**: Increased by 4 percentage points to 22.5% [3][4] - **Dairy Cow Inventory**: Exceeded 490,000 heads, a 9% increase year-on-year, including 30,000 organic dairy cows from acquisitions [4][5] - **Raw Milk Production**: Reached 3.01 million tons, a 16.1% increase year-on-year, with annualized yield per cow at 12.8 tons, up 1.6% [4][5] - **Feed Costs**: Decreased by 16.7% to RMB 1.95 per kg, with sales cost per kg of milk down 13.4% to RMB 2.53 [4][5] - **Cash Flow Improvement**: Operating cash flow, excluding working capital changes, grew 17% to RMB 2.8 billion [4][7] Strategic Developments - **Specialty Milk Production**: Accelerated focus on specialty milk, with organic milk production reaching 470,000 tons and a target of 10% specialty milk by 2027 [4][6] - **A2 Milk Certification**: Achieved for Zhangyuan Phase I and Shanghe Pasture, with plans to increase certified student pastures to 13 [4][6] Industry Insights - **Inventory Reduction**: Accelerated de-stocking in the industry, with small farms disappearing; a potential turning point in dairy supply-demand dynamics expected by Q3 2025 [4][8] - **Import Reduction**: Decrease in imported milk powder, with demand-side stimulus policies likely to address supply-demand discrepancies [4][8] - **Future Impairment Outlook**: Significant improvement in impairment expected in 2025, with no large-scale one-time impairment projects anticipated [4][10] Challenges and Risks - **Market Dynamics**: The industry faces challenges including sales issues, market expansion, and financial pressures, particularly for small-scale farms [20][25] - **Supply Chain Issues**: The trend of small farms exiting the market due to financial difficulties and inability to secure loans [20][25] - **Feed Cost Uncertainty**: Potential challenges from tariff countermeasures affecting feed costs in Q4 [9] Price Trends and Projections - **Raw Milk Price**: Expected to stabilize around RMB 3.45 per kg, with potential to approach RMB 4 per kg [16][22] - **Consumer Demand**: Current demand remains sluggish, with a potential turning point in the second half of 2025 [32][35] Conclusion - Modern Dairy is navigating a complex landscape with significant operational improvements and strategic initiatives in specialty milk production. However, the company faces industry-wide challenges, particularly from small-scale farms and fluctuating market dynamics. The outlook for 2025 suggests a cautious optimism with expected improvements in financial performance and market conditions.

Core Viewpoint - The dairy industry is expected to see a turning point in the second half of 2024, with signs of recovery in milk powder and beef prices after a prolonged downturn [1][2][3] Industry Summary - The dairy sector has experienced a three-year downtrend, but recent indicators suggest a potential rebound. The domestic milk price is projected to decline in 2024 but may stabilize and improve in 2025 due to accelerated capacity adjustments and rising international milk prices [2][3] - Domestic raw milk production and cattle inventory are both expected to decrease in 2024, with a reported 4.5% drop in cattle inventory, reversing five years of growth. The total raw milk output is anticipated to be 40.79 million tons, a year-on-year decrease of 2.8% [3][4] - The average purchase price of fresh milk in China was 3.11 yuan/kg in February 2024, down 0.3% month-on-month and 14.1% year-on-year, while international prices are significantly higher, with New Zealand at approximately 3.12 yuan/kg, and the US and Europe at 3.83 yuan/kg and 4.01 yuan/kg respectively [3] Company Summary - Modern Dairy reported a revenue of 13.25 billion yuan in 2024, a slight decrease of 1.5% year-on-year, but cash EBITDA increased by 19.6% to 2.99 billion yuan. The company aims to improve operational efficiency and reduce costs to navigate the challenging market [7][9] - The cost of milk sales decreased to 2.53 yuan/kg, down 13.4% year-on-year, and feed costs fell to 1.95 yuan/kg, down 16.7%, contributing to a gross profit margin increase of 2.8 percentage points [7] - Despite a net loss of 1.42 billion yuan in 2024, attributed to declining milk and beef prices and biological fair value adjustments, the company remains optimistic about future profitability as prices stabilize [6][8] - Modern Dairy is diversifying its revenue streams, with a reported income of 2.8 billion yuan from comprehensive breeding solutions and significant advancements in breeding projects aimed at reducing reliance on imported frozen semen [9]

Financial Performance - The company recorded cash EBITDA of RMB 2,986 million, an increase of approximately RMB 490 million or 19.6% compared to 2023[3]. - Total revenue for the year was RMB 13.254 billion, a decrease of 1.5% compared to RMB 13.458 billion in 2023[5]. - The company reported a loss of RMB 1,469 million for the year, compared to a profit of RMB 185 million in 2023[5]. - Gross profit for 2024 is expected to be RMB 3,128,013, down from RMB 3,451,465 in 2023, indicating a decline of about 9.36%[9]. - The company reported a net loss before tax of RMB 1,474,212 for 2024, compared to a profit of RMB 228,996 in 2023, representing a significant shift in performance[9]. - The group reported a pre-tax loss of RMB 1,474,212 for the year ending December 31, 2024, compared to a pre-tax profit of RMB 228,996 in 2023[29]. - The total dividend declared for the year was RMB 34,888,000, a decrease of 68.8% from RMB 111,997,000 in 2023, with a proposed dividend of RMB 0.0122 per share for the upcoming year[45]. - The company reported a net loss attributable to shareholders of RMB (1,416,753) thousand for 2024, compared to a profit of RMB 175,159 thousand in 2023, indicating a significant decline in performance[46]. Revenue and Sales - Raw milk sales revenue amounted to RMB 10.45 billion, reflecting a year-on-year growth of 1.9%[4]. - The company’s herd size increased by 9.0% to 491,169 heads, while total fresh milk sales volume rose by 13.6% to 289.3 thousand tons[5]. - Revenue from breeding products and platform services increased to RMB 68,864,000 in 2024 from RMB 51,496,000 in 2023, a growth of 33.9%[23]. - The raw milk business generated external sales of RMB 10,454,371, an increase of 1.9% from RMB 10,263,657 in the previous year[29]. - The integrated breeding solutions segment recorded revenue of RMB 2,800.0 million, a decline of 12.4% from RMB 3,194.6 million in 2023, primarily due to weak market demand[67]. Assets and Liabilities - The company’s total equity decreased to RMB 11,122,796 in 2024 from RMB 11,842,764 in 2023, a decline of approximately 6.08%[12]. - Total assets less current liabilities increased to RMB 25,310,830 in 2024 from RMB 22,931,460 in 2023, marking an increase of approximately 10.05%[12]. - Non-current assets rose to RMB 25,861,893 in 2024, up from RMB 24,526,141 in 2023, reflecting a growth of about 5.43%[11]. - The group’s biological assets had a carrying amount of RMB 12,435,776,000 as of December 31, 2024, compared to RMB 11,927,977,000 in 2023, indicating an increase of 4.3%[21]. - The group’s net debt is approximately RMB 10,795.4 million as of December 31, 2024, compared to approximately RMB 8,813.2 million as of December 31, 2023, indicating an increase of about 22%[89]. Operational Metrics - The average annual milk yield per cow reached 12.8 tons, a year-on-year increase of 1.6%, while total raw milk production reached 3.005 million tons, up 16.1%[4]. - The average price of raw milk has been declining for three consecutive years, impacting production motivation and leading to a decrease in raw milk output by 2.8% in 2024, the first decline since 2018[51]. - The average prices of corn and soybean meal, key feed components, decreased by 14.8% and 21.3% respectively, which somewhat alleviated cost pressures for dairy farming[51]. - The proportion of mature cows in the total herd increased to 51.1% in 2024, up 2.6 percentage points from 2023, aligning with the group's herd management strategy[56]. Financial Management - The company’s debt-to-asset ratio increased by 4.9 percentage points to 67.2% by the end of 2024, while the proportion of interest-bearing loans with a maturity of over one year rose to 79.5%[4]. - The financing costs for 2024 are expected to be RMB (528,674), slightly higher than RMB (521,247) in 2023, indicating a rise of about 1.83%[9]. - The company incurred a goodwill impairment loss of RMB 599,240 in 2024, which was not present in 2023[9]. - The company recognized impairment losses of RMB 18,686,000 for trade receivables and other receivables in 2024, up from RMB 17,278,000 in 2023[39]. Strategic Initiatives - The company aims to enhance its core competitiveness and build a sustainable business model in the dairy farming industry, focusing on steady growth in core business[96]. - The development strategy will emphasize cost control, lean management, and innovation, while actively embracing digitalization and sustainability[97]. - The company is exploring a comprehensive cattle service industry chain, offering a one-stop solution from breeding to management output, technical training, and consulting services[99]. - The company is actively investing in breeding business to enhance self-sufficiency in core breeding sources and improve dairy cow genetic quality[62]. Market Environment - The government has introduced supportive policies to stabilize the dairy industry, including subsidies for fresh milk and beef cattle production, aimed at reducing costs for farmers and enterprises[52]. - In 2024, China's dairy product imports decreased by 9.5% year-on-year to 2.768 million tons, marking three consecutive years of significant decline[53]. - The self-sufficiency rate of raw milk in China increased to 72% in 2024, up 1 percentage point from 2023, reflecting a continuous recovery trend[53].

Summary of the Conference Call on Modern Dairy Industry Industry Overview - The dairy farming industry in China has a low concentration level, with a CR5 of approximately 19%, significantly lower than the CR3 of 50% in the United States, indicating substantial room for improvement [5] - The average scale of the top 30 dairy farming groups has increased by nearly 90% over the past three years, highlighting a clear trend towards larger operations [5] Key Insights on Milk Prices - It is anticipated that fresh milk prices will bottom out and rebound in the second half of 2025, moving away from an L-shaped stagnation [2][6] - Historical average prices from 2016 to 2019 ranged from 2.6 to 3.5 yuan per kilogram, suggesting potential for price recovery as supply and demand dynamics shift [6] Profitability Factors for Dairy Farms - Profitability for upstream dairy farms is strongly influenced by raw milk prices, feed prices, and beef prices. Currently, both raw milk and beef prices are at low levels, but there is strong upward potential [7] - Super-large farms exhibit resilience, allowing them to withstand current pressures and achieve profitability [7] International Market Influence - International raw milk prices from major dairy-producing regions (New Zealand, EU, and the US) are significantly higher than domestic prices, indicating that domestic prices have room to rise [8] Short-term Catalysts - The post-Spring Festival demand slump is expected to lead to further declines in raw milk prices, accelerating capacity reduction in upstream farms and increasing the need for herd restructuring [9] Historical Development of the Dairy Industry - The dairy farming industry has evolved through five stages since 1978, with significant growth and consolidation occurring in recent years [10] Production and Yield Trends - Dairy production increased from 30.74 million tons in 2018 to 41.96 million tons in 2023, with a compound annual growth rate of 6.43%. However, production is projected to decrease to approximately 40.79 million tons in 2024 [12] - Despite a decline in herd numbers, milk yield per cow has been increasing, indicating potential for overall production stability [12] Modern Dairy's Performance - Modern Dairy's raw milk price has decreased from a peak of 4.38 yuan per kilogram in 2021 to 3.12 yuan per kilogram in early February 2025, yet the company has shown strong resilience with a compound annual revenue growth rate of 37.89% from 2021 to 2023 [13] - The company maintains a close relationship with Mengniu, supplying over 90% of its raw milk to them, which ensures stable and high selling prices [14] Strategic Measures - In response to market changes, Modern Dairy has focused on optimizing herd structure and controlling herd size, resulting in a slight decrease in cow numbers while still achieving revenue growth in raw milk business [15] - The company has effectively controlled feed costs through self-supply and partnerships, maintaining lower feed costs compared to competitors [15] Financial Health - Modern Dairy exhibits strong cash flow and has optimized its leverage, maintaining a conservative approach compared to more aggressive competitors [17] Competitive Advantages - As a leading enterprise, Modern Dairy benefits from genetic improvements and scientific management, stable high-price sales through partnerships, and robust financial health, positioning it favorably within the industry [18]

Summary of Conference Call Notes Company and Industry - The conference call pertains to the dairy industry, specifically focusing on a dairy company involved in milk production and sales. Key Points and Arguments 1. **Production and Yield Guidance** The company expects to maintain a yield of 12.8 tons for the year, with a potential increase to around 13 tons next year, indicating confidence in production capabilities despite lower yields in the second half of the year due to external factors [1][2][3] 2. **Sales Growth Expectations** The company anticipates double-digit sales growth for the upcoming year, driven by improved production yields and contributions from organic milk, which will impact both halves of the year [1][2] 3. **Cost Structure and Cash Costs** The estimated cash costs are projected to be between 3.33 to 3.34 per unit, with management and sales expenses included in this figure. The company is managing costs effectively despite market pressures [3][4] 4. **Market Performance and Price Trends** The company experienced a decline in market prices, with a drop of 13% in the first nine months and 15% in the third quarter. However, the company's decline was less severe than the market average due to better quality and management of feed costs [4][5] 5. **Competitive Landscape** Competitors face higher feed costs, which could impact their profitability. The company maintains a focus on quality, which allows it to manage costs better than some smaller competitors [6][7] 6. **Government Subsidies and Market Dynamics** Government subsidies for new dairy farms will cease after this year, which may lead to a reduction in supply as smaller farms struggle without financial support. The company expects a market adjustment as a result [9][10] 7. **Future Supply and Demand Outlook** The company predicts a tightening of supply in the market by mid-2024, with potential price increases for milk products. The overall sentiment in the industry is cautious but optimistic regarding future demand [12][30] 8. **Financial Health and Debt Management** The company aims to reduce its debt ratio, currently projected at 62%, with a target to lower it further in the coming years. The focus remains on maintaining a healthy balance sheet amidst market fluctuations [24][25] 9. **Cash Flow Projections** The company expects stable cash flow for the year, with operational cash flow projected around 28 billion, indicating a solid financial position despite market challenges [22][23] 10. **Impact of Culling on Profitability** Increased culling of dairy cows has led to a temporary boost in profits due to reduced costs, although this has also resulted in non-cash losses that need to be managed [17][18] Other Important but Overlooked Content - The company is actively managing its relationships with major buyers, ensuring a stable supply chain and maintaining a significant portion of sales directed towards key partners [19][20] - The company is cautious about future capital expenditures, indicating a strategic approach to investments in light of market conditions [23] - The management is aware of the competitive pressures and is taking steps to ensure that operational efficiencies are maximized to maintain profitability [21][26]

Revenue and Sales Performance - Revenue for the six months ended 30 June 2024 was RMB 6,418.5 million, a decrease of 3.2% compared to RMB 6,633.4 million in the same period in 2023[7] - Raw milk sales revenue reached RMB 5.112 billion, a year-on-year increase of 1.3%[12] - Raw milk sales revenue grew by 1.3% to RMB 5.112 billion, with total raw milk sales volume increasing by 13.4% to 1.4 million tons[14] - Modern Dairy's sales revenue for the first half of 2024 was RMB 6,418.5 million, a year-over-year decrease of 3.2%[53][54] - Raw milk sales revenue increased by 1.3% year-over-year to RMB 5,111.7 million, driven by a 13.4% increase in sales volume to 1,398 thousand tons[53][57] - Revenue for the six months ended 30 June 2024 decreased to RMB 6,418,499 thousand, compared to RMB 6,633,422 thousand in the same period in 2023, representing a decline of 3.2%[191] Profitability and Margins - Cash EBITDA increased by 19.2% to RMB 1,515.0 million, up from RMB 1,271.4 million in the same period in 2023[7] - The Group's raw milk business gross profit margin increased by 2.0 percentage points compared to the same period in 2023[12] - The gross profit margin of raw milk business improved by 2.0 percentage points, with gross profit increasing by RMB 120 million, an 8.4% year-on-year growth[14] - Gross profit for the raw milk business increased by 8.4% year-on-year to RMB1,547.0 million, with gross profit margin rising to 30.3% from 28.3%[70] - Gross profit for integrated dairy farming solutions surged by 38.9% year-on-year to RMB130.8 million, with gross profit margin improving to 10.0% from 5.9%[70] - Gross profit for the six months ended 30 June 2024 increased to RMB 1,677,739 thousand, up 10.3% from RMB 1,520,752 thousand in the same period in 2023[191] Cash Flow and Financial Position - Net cash from operating activities decreased by 81.8% to RMB 397.5 million, down from RMB 2,182.9 million in the same period in 2023[7] - The Group's asset-liability ratio remained stable at 62.7%, with long-term debt accounting for 76.2% of the total debt structure[13] - The Group's financing cost ratio decreased from 3.5% in the same period last year to 3.4% this year[13] - The financing cost rate decreased from 3.5% to 3.4%, and the debt-to-asset ratio remained stable at 62.7%[14] - Net cash inflow from operating activities decreased by RMB1,785.4 million yoy to RMB397.5 million, due to adjustments in working capital management strategy[90] - Net cash inflow from operating activities decreased by RMB1,785.4 million to RMB397.5 million in 2024, compared to RMB2,182.9 million in 2023, due to the expiration of large supply chain finance payments[93] - Net cash outflow from investing activities increased by RMB204.0 million to RMB1,490.2 million in 2024, driven by higher payments for property, plant, and equipment, and increased loans to associates[94] - Net cash inflow from financing activities was RMB2,474.1 million in 2024, a significant turnaround from a net outflow of RMB656.2 million in 2023, primarily due to increased interest-bearing borrowings[95] - Total interest-bearing borrowings increased by 20.3% to RMB13,835.5 million as of 30 June 2024, compared to RMB11,496.7 million as of 31 December 2023[96] - Bank borrowings increased to RMB9,468.4 million as of 30 June 2024, up from RMB7,390.4 million as of 31 December 2023, with interest rates ranging from 1.50% to 4.20%[99] - Other borrowings rose to RMB977.6 million as of 30 June 2024, compared to RMB547.2 million as of 31 December 2023, with interest rates ranging from 3.35% to 6.00%[101] - Long-term bonds decreased slightly to RMB3,389.6 million as of 30 June 2024, down from RMB3,559.0 million as of 31 December 2023[105] - Capital commitments decreased by 67.7% to RMB90.9 million as of 30 June 2024, compared to RMB281.1 million as of 31 December 2023, reflecting cautious investment and strict capital expenditure control[109] - Available and unutilized credit facilities amounted to RMB7,035.8 million as of 30 June 2024, supporting debt repayment and operational needs[89][92] Operational Performance and Efficiency - Herd size increased by 6.3% to 444,859 heads, compared to 418,596 heads in the same period in 2023[7] - Average annualized milk yield per cow increased by 3.2% to 13.0 tons/head/year, up from 12.6 tons/head/year in the same period in 2023[7] - Total milk production increased by 16.1% to 1.45 million tons, compared to 1.249 million tons in the same period in 2023[7] - The average annual milk yield per cow reached 13 tons, a 3.2% year-on-year increase[14] - The Group's total number of dairy cows increased by 6.3% year-on-year to 444,859 heads as of 30 June 2024, with milkable cows accounting for 50.6% of the total, up 1.8 percentage points from 48.8% in 2023[34] - The company operates 42 dairy farms in China, with a total of 444,859 dairy cows, a 6.3% year-on-year increase, and the proportion of mature cows increased to 50.6%, up 1.8 percentage points[35] - The average annual milk yield per milkable cow reached 13.0 tons, a 3.2% year-on-year increase, and the total milk yield was 1,450 thousand tons, a 16.1% year-on-year increase[36][37] - The company has established four forage grass plantation bases covering 66,000 mu, with an annual output of 30,000 tons of high-quality forage grass, and cooperates with third-party companies to improve 15,000 mu of saline-alkali land[41][42] - The company owns five feed production and processing plants in China and jointly operates three feed production plants with large domestic feed companies, with an annual supply capacity of over 200,000 tons of high-quality forage grass[42] - The Aiyangniu e-commerce platform achieved a transaction amount of RMB 17.4 billion in the first half of 2024, with significant growth in both transaction amount and volume[44][45] - The Yunyangniu intelligent digital system covers 457 farms and 1.57 million cows, focusing on digital farming and improving digital and intelligent breeding capabilities[44][45] - The company sold approximately 360,000 units of high-quality frozen semen in the first half of 2024, promoting genetic improvement in dairy cows[46][47] ESG and Sustainability - Modern Dairy maintained a "BBB" investment-grade credit rating from Standard & Poor's for four consecutive years[15][16] - MSCI upgraded Modern Dairy's ESG rating to BBB, marking a three-level improvement within a year[15][16] - Modern Dairy's MSCI ESG rating was upgraded to "BBB," marking a significant three-level jump within a year, and the company was selected into the S&P Global Sustainability Yearbook (China Edition) 2024[48] - Modern Dairy was awarded the "BBB" investment grade rating by Standard & Poor's with a stable outlook, becoming the first dairy farming company globally to achieve this rating[49][50] - Modern Dairy was selected for the S&P Global Sustainability Yearbook 2024, highlighting its achievements in sustainable development[50][51] - The company won the "2024 Digital Innovation Leadership Award" for its digital transformation in production management and the entire industry chain[50][51] - The Group aims to reduce unit carbon emissions by 7%, 15%, and 20% by the end of 2025, 2030, and 2035, respectively, compared to the 2021 baseline[134] - The Group has built a green recycling industrial chain, including forage grass planting, cow breeding, fertilizer treatment, biogas power generation, and fertilizer back to the field[130] - The Group has launched the Dual-carbon Project, setting a quantitative target for carbon intensity emissions by 2035[133] Cost Management and Efficiency - The average unit cost of raw milk before inter-segment offset decreased to RMB2.58/kg from RMB2.95/kg in 2023, with feed costs dropping to RMB2.02/kg from RMB2.39/kg, a year-on-year decrease of RMB0.37/kg[64][67] - The cost of sales for integrated dairy farming solutions decreased by 21.3% year-on-year to RMB1,176.0 million, driven by a reduction in sales scale[65][68] - Total cost of sales decreased by 7.3% year-over-year to RMB 4,740.8 million, primarily due to reduced sales scale in integrated dairy farming solutions[61][62] - Administrative expenses decreased by 5.3% yoy to RMB359.0 million, reflecting cost reduction and efficiency improvement efforts[83] - Finance costs decreased by RMB16.0 million yoy to RMB244.4 million, with interest-bearing borrowings contributing RMB199.9 million[87] Market and Industry Trends - China's raw milk production increased by 3.4% year-on-year in the first half of 2024, but raw milk prices continued to decline[20][22] - China's dairy product imports decreased by 15.6% in volume and 22.4% in value year-on-year in the first half of 2024[21][22] - The average selling price (ASP) of raw milk decreased by 10.5% year-over-year to RMB 3.66/kg due to downward price trends in the domestic raw milk market[57][58] Strategic Initiatives and Business Development - The Group operates 42 farm companies across 13 provinces and autonomous regions, focusing on improving the feeding environment and health of dairy cows to increase the proportion of the core herd[34] - The Group actively eliminated low-yielding and inefficient cows to optimize herd structure and increase dairy cow yield, resulting in significant improvements in key operational indicators[28] - The Group has strengthened quality farm management, focusing on increasing the ratio of core dairy cows and overall health levels, leading to solid development in the raw milk business[28] - The Group continues to explore emerging technologies such as collars, pedometers, and image recognition to improve breeding, health standards, and safety management in farm production[32] - The Group has renovated cowshed equipment, improved ventilation, adjusted feed formulas, and increased feeding frequency to enhance cow comfort and milk production[31] - The Group leverages the "integration of forage grass planting, cow breeding, and milk processing" model, ensuring high nutritional value and freshness of raw milk[30] - The Group has expanded into feeds, forage grass, intelligent digital platforms, and breeding, forming two major business segments: raw milk and integrated dairy farming solutions[26] - The Group is committed to deploying forces throughout the entire dairy value chain, innovating with digital intelligence, and aiming to become a global dairy farming leader[25] - The Group has established long-term strategic cooperation with large dairy manufacturing enterprises to jointly promote the development of the dairy industry[25] - The Group will focus on cost reduction and efficiency enhancement, shifting from "volume-driven profitability" to "value-driven profitability" to achieve sustainable profit growth[138] - The Group aims to lead the dairy industry towards digital innovation and a sustainable development model emphasizing low-carbon and environmentally friendly practices[139] Corporate Governance and Shareholding - Modern Farming Wuhe's total registered capital increased to approximately RMB529 million after the capital injection, with Modern Farming owning 66.1%, China Agricultural owning 25.4%, and Anhui Suida owning 8.5% respectively[116] - The capital injection of RMB600 million by China Agricultural into Modern Farming Wuhe constitutes a deemed disposal of 25.4% equity interest in the subsidiary[110][113] - The Group's capital commitments for property, plant, and equipment decreased by RMB190.2 million (67.7%) to RMB90.9 million as of June 30, 2024, compared to RMB281.1 million as of December 31, 2023[112] - The Group's biological assets were valued at RMB861.7 million, accounts receivable at RMB23.7 million, and real estate at RMB23.6 million as of June 30, 2024, all pledged as security for the Group's borrowings[111] - The Company granted China Agricultural an option to subscribe for shares at an exercise price of HK$2.06 per share, with a total subscription amount not exceeding RMB600 million or 6% of the Company's total issued shares[114][115] - The Group's financial instruments include equity instruments at FVTOCI, trade receivables, bank deposits, and derivatives, with risks managed through regular reviews and hedging strategies[122][123] - The Group manages foreign exchange risk by monitoring net exposures and may use currency options or swaps to mitigate risks related to RMB-USD exchange rate fluctuations[123] - Credit risk is managed through an internal credit scoring system, with customer-specific credit limits reviewed twice a year and monitoring procedures in place to recover overdue debts[124] - The Group had 8,819 employees in the Chinese Mainland and Hong Kong as of 30 June 2024, with total staff costs (excluding equity-settled share award expenses) of approximately RMB575.5 million[126] - The Group has introduced advanced management methods such as five-aspect management, benchmarking management, and lean management to improve organizational efficiency[127] - The Group has upgraded its performance incentive system and optimized the employee happiness and caring plan[127] - The Group has strengthened the construction of four talent teams: leading managerial talents, elite professionals, up-and-coming young talents, and scarce high-end talents[127] - The Group has implemented a full-coverage training model, delivering courses to front-line employees to improve overall management capabilities[127] - The Group's milk quality indicators are better than EU standards, with strict monitoring of raw milk production to ensure quality[129] - The Group has enhanced cooperation with Mengniu in product testing, unifying inspection standards and processes to improve testing efficiency and product quality[129] - The Group actively promotes local economic development by providing multiple jobs nationwide, effectively alleviating rural labor surplus and increasing local farmers' income[136] - The Group is committed to its corporate vision of "deploying the whole industry chain, be innovative with digital intelligence, and be a global dairy farming leader"[137] - No interim dividend was declared for the six months ended 30 June 2024[141] - As of 30 June 2024, Mr. Sun Yugang holds 17,808,287 shares, representing 0.22% of the total issued shares[144] - As of 30 June 2024, Mr. Zhu Xiaohui holds 10,208,593 shares, representing 0.13% of the total issued shares[144] - Mengniu Group holds 56.36% of the issued share capital of the Company as of the report date[146] - China Mengniu Dairy Company Limited holds a beneficial interest of 1,246,079,369 shares, representing 15.74% of the company's issued share capital[150] - China Mengniu Dairy Company Limited has an interest in controlled corporations through Future Discovery Limited, holding 3,214,962,513 shares, representing 40.62% of the company's issued share capital[150] - Central Huijin Investment Ltd. holds 568,181,818 shares through BOCI Financial Products Limited, representing 7.18% of the company's issued share capital[150] - Bank of China Limited holds 568,181,818 shares through BOCI Financial Products Limited, representing 7.18% of the company's issued share capital[150] - New Hope Dairy Co., Ltd. holds 635,345,763 shares through GGG Holdings Limited, representing 8.03% of the company's issued share capital[150] - GGG Holdings Limited holds a beneficial interest of 635,345,763 shares, representing 8.03% of the company's issued share capital[152] - MGD Holdings holds a beneficial interest of 400,000,000 shares, representing 5.05% of the company's issued share capital[152] - The company operates a restricted share award scheme (Share Award Scheme II) adopted on 26 March 2018, which is funded by existing shares of the company and remains effective for ten years[154] - As of 30 June 2024, the company had 7,915,662,048 shares issued[153] - 568,181,818 shares of the company were lent to BOCI Financial Products Limited as of 30 June 2024[153] - The Board granted a total of 79,042,000 Award Shares under the Share Award Scheme II to 160 middle and senior management personnel, with 5,770,000 and 3,400,000 shares granted to executive directors Sun Yugang and Zhu Xiaohui respectively[160] - The fair value of an Award Share as of 3 April 2024 was HK$0.67 per share, determined based on the market price of the Company's shares at the grant date[160] - The trustee of the share award scheme purchased 36,914,000 ordinary shares from the open market at a consideration of HK$27,769,000 (RMB25,281,000) as restricted shares for the scheme[170] - The Company's Board comprised nine Directors as of the interim report date, including two executive Directors, four non-executive Directors, and three independent non-executive Directors[168] - The Company confirmed compliance with the Model Code for securities transactions by Directors, with all Directors adhering to the required standards throughout the period[169] - Mr. Zhang Ping resigned as an executive director and member of the Sustainability Committee of China Mengniu on 26 March

Financial Performance - The company reported cash EBITDA of RMB 1,515 million for the six months ended June 30, 2024, an increase of approximately RMB 244 million or 19.2% compared to the same period in 2023[2]. - The company's revenue for the six months ended June 30, 2024, was RMB 6,418.5 million, a decrease of 3.2% compared to RMB 6,633.4 million in the same period of 2023[4]. - The company recorded a net cash inflow from operating activities of RMB 397.5 million, down 81.8% from RMB 2,182.9 million in the previous year[4]. - For the six months ended June 30, 2024, the total comprehensive income was a loss of RMB 220,968 thousand, compared to a loss of RMB 197,211 thousand for the same period in 2023, representing an increase in loss of approximately 12.1%[8]. - The basic and diluted loss per share for the six months ended June 30, 2024, was RMB 2.91, compared to RMB 2.66 for the same period in 2023, indicating a decline of about 9.4%[8]. - The company reported a net loss attributable to shareholders of RMB 228.3 million for the period, a decrease of 209.1% compared to a profit of RMB 209.3 million in 2023[76]. - Basic and diluted loss per share was approximately RMB 2.91, compared to earnings of RMB 2.66 in 2023[76]. Revenue and Sales - Raw milk sales revenue amounted to RMB 5.112 billion, reflecting a year-on-year growth of 1.3%[2]. - Revenue from raw milk business was RMB 5,111,706 thousand, up from RMB 5,044,062 thousand, reflecting a growth of 1.3% year-over-year[16]. - The group reported a total revenue of RMB 6,418,499 thousand for the six months ended June 30, 2024, a decrease of 3.2% compared to RMB 6,633,422 thousand for the same period in 2023[16]. - The average selling price of raw milk was RMB 3.66 per kg, reflecting a decrease influenced by the domestic raw milk market price decline[57]. - The company sold approximately 1,398,437 tons of raw milk, an increase of 13.4% compared to 1,233,400 tons in 2023, attributed to improved annual yield per cow[56][57]. - The integrated breeding solution business generated revenue of RMB 1,306.8 million, down 17.8% from RMB 1,589.4 million in 2023, primarily due to market conditions[58]. Assets and Liabilities - Non-current assets as of June 30, 2024, totaled RMB 24,792,417 thousand, an increase from RMB 24,526,141 thousand as of December 31, 2023, reflecting a growth of approximately 1.1%[9]. - Current assets decreased to RMB 7,415,491 thousand as of June 30, 2024, from RMB 6,868,103 thousand as of December 31, 2023, showing a decline of about 7.9%[9]. - The company's total liabilities as of June 30, 2024, were RMB 13,092,542 thousand, compared to RMB 11,088,696 thousand as of December 31, 2023, indicating an increase of about 18.1%[10]. - Non-current liabilities increased to RMB 6,412,729,000 as of June 30, 2024, compared to RMB 5,183,959,000 as of December 31, 2023[41]. - As of June 30, 2024, the company reported a total debt of RMB 9,468,381,000, an increase of 28.2% from RMB 7,390,443,000 as of December 31, 2023[41]. Cost and Expenses - The cost of sales for raw milk production was RMB 3,564,743,000, slightly down from RMB 3,617,480,000, indicating a decrease of 1.5%[26]. - Employee benefits expenses rose to RMB 445,525,000, compared to RMB 405,443,000 in the previous year, an increase of 9.9%[26]. - Interest expenses on bank loans decreased to RMB 147,608,000 from RMB 163,883,000, a reduction of 9.9%[28]. - The total borrowing cost was RMB 244,427,000, slightly down from RMB 244,688,000, indicating a decrease of 0.1%[28]. - The income tax expense for the six months ended June 30, 2024, was RMB 15,951,000, compared to RMB 15,397,000 in the previous year, an increase of 3.6%[29]. - The net loss from other income and expenses increased to RMB 53.7 million, compared to a net loss of RMB 46.3 million in the previous year[73]. Operational Metrics - Average annual milk yield per cow reached 13 tons, representing a year-on-year increase of 3.2%, while total raw milk sales volume reached 1.4 million tons, up 13.4% year-on-year[2]. - The herd size increased by 6.3% to 444,859 heads compared to 418,596 heads in the previous year[4]. - The company operates 42 farms across 13 provinces and regions in mainland China, focusing on optimizing the breeding environment and cow health[47]. - The company aims to enhance its breeding capabilities by increasing investment in breeding technology and achieving self-sufficiency in core breeding resources[53]. Dividends and Shareholder Information - The company did not declare an interim dividend for the six months ended June 30, 2024, compared to no dividend declared for the same period in 2023[3]. - The company declared a final dividend of RMB 0.0045 per share, totaling RMB 34,888,000, down from RMB 111,997,000 in the previous year[32]. - The company purchased a total of 36,914,000 shares of its ordinary stock for a total price of HKD 27,769,000 (approximately RMB 25,281,000) under its share award plan[88]. Governance and Compliance - The audit committee consists of two independent non-executive directors and one non-executive director, overseeing financial reporting and risk management[89]. - The group's interim financial statements for the six months ending June 30, 2024, have been reviewed by the auditors in accordance with the relevant standards[90]. - The interim results announcement will be published on the company's website and the Hong Kong Stock Exchange website[91]. - The company expresses gratitude to shareholders for their continued support and acknowledges the hard work of all employees[92].

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