Production and Capacity - By the end of the reporting period, China Shengmu owned 34 farms with a total of 144,000 dairy cows and a daily fresh milk production of approximately 2,015 tonnes, achieving an annual production capacity of 600,000 tonnes of ecological organic raw milk[4]. - As of December 31, 2024, the Group owned 144,448 cows, including 62,842 milkable cows, and sold a total of 699,803 tonnes of raw milk, representing a slight decrease of 1.6% year-on-year[25][26]. - The Group produced 2,015 tonnes of raw fresh milk per day in 2024, with 21 organic certified farms contributing 1,534 tonnes per day[52][55]. - The Group's herd size increased by 5.7% to 156,481 cows as of December 31, 2024[53][56]. - The average milk yield per milkable cow reached 12.05 tonnes in 2024, representing a year-on-year increase of 0.67 tonnes[58]. Financial Performance - Revenue for the year was RMB 3,126.2 million, reflecting a year-on-year decrease of 7.6% due to declining raw milk prices[25][26]. - The total sales revenue for 2024 was RMB 3,126.2 million, representing a year-on-year decrease of 7.6% from RMB 3,383.6 million in 2023[90]. - The gross profit for 2024 was RMB 925.9 million, down from RMB 1,025.0 million in 2023, with a gross profit margin of 29.6% compared to 30.3% in the previous year[94]. - The average sales price of the Group's comprehensive raw milk was RMB 4.47/kg, reflecting a year-on-year decrease of RMB 0.29/kg[63]. - The loss attributable to owners of the parent company was RMB 65.5 million in 2024, a decrease of RMB 151.6 million compared to a profit of RMB 86.1 million in 2023[121]. Cost Management - The cost of sales per kilogram of milk decreased by 5.2% year-on-year, benefiting from lower feed prices and internal cost control measures[25][26]. - The sales cost per kilogram of milk in 2024 was RMB 3.14/kg, with feed costs at RMB 2.54/kg, representing a year-on-year decrease of RMB 0.11/kg[64]. - Administrative expenses decreased by 8.3% year-on-year to RMB 152.6 million in 2024, accounting for 4.88% of sales revenue[105]. - Selling and distribution expenses decreased by 21.8% to RMB 49.1 million from RMB 62.7 million in 2023 due to cost optimization strategies[100]. Sustainability and Ecological Initiatives - The company has transformed 350,000 mu of desert into high-quality pasture and planted over 98 million sand-fixing trees, creating a robust ecological environment[3]. - China Shengmu's end-user brand organic milk won the Gold Award at the 17th Asia International Organic Product Expo, highlighting its commitment to sustainable practices[6]. - The company has built 11 reservoirs, 9 organic manure fermentation plants, and 1 bio-organic fertilizer processing plant to support its ecological initiatives[3]. - The Group's unique ecological model integrates desert governance with the organic dairy industry, contributing to sustainable development[79]. - The Group was recognized by the United Nations Global Compact for its best practices in "Sustainable Production and Consumption"[6]. Market Trends and Industry Challenges - The dairy industry in China is experiencing increased concentration, with small and medium-sized farms being phased out, leading to a dominance of large-scale and standardized farms[21]. - The supply-demand situation in the industry remains severe, but the Group maintains a firm belief in refining management and aligning with government strategies[156]. - In 2024, China's total raw milk production was 40.79 million tonnes, a year-on-year decrease of 2.8%, marking the first decline since 2018[49][50]. - The average price of raw fresh milk in primary producing regions was RMB 3.11/kg by the end of December 2024, a decrease of 15.0% compared to the previous year[49][50]. Strategic Focus and Future Outlook - Looking forward to 2025, the Group anticipates improved consumption growth in dairy products, supported by government initiatives to boost consumption[33]. - The Group's strategic focus includes sustainable development and enhancing corporate value amidst industry challenges[28][30]. - The Group aims to ensure the growth of Mengniu's Deluxe Desert Organic business with high quality as a core business goal for 2025[156]. - The Group will focus on comprehensive cost control, efficiency improvement, environmental protection upgrading, and water resource guarantee to achieve operational breakthroughs[156]. Debt and Financing - The gearing ratio was maintained at 50.7%, with a credit facility of RMB 10 billion, ensuring solid liquidity[28][30]. - The proportion of long-term loans increased to 57.3% in 2024, up from 51.4% in 2022[38]. - The annual average financing rate decreased to 2.44% in 2023 from 2.67% in 2022[40]. - The Group maintained a credit limit of RMB 10 billion in 2024, with a stable credit utilization rate of less than 30%[124]. Employee and Operational Efficiency - The Group's total employee costs decreased to RMB 326.8 million in 2024 from RMB 377.4 million in 2023, despite a reduction in total employees from 2,701 to 2,217[84]. - The Group's refined cost management and risk governance capabilities were enhanced through its digitalization efforts[74]. - The Group's "Cow Identification + AI Model Algorithm" and the industry-level "Cow Milk Calibration Model" achieved over 95% accuracy, enhancing individual cow efficiency management[74]. Awards and Recognition - The Group's organic products won the Gold Award at the Asian Organic Expo, reinforcing its commitment to high-quality organic practices[73]. - The Group achieved 100% ESG disclosure for three consecutive years and received a comprehensive "B-level" certification from the Carbon Disclosure Project (CDP) in climate change, water security, and forest risk[79]. - The Group's Electronic Records Management System won the "Digital Intelligence Pioneer Product - Best Practice Award," accelerating its digital transformation[74].

2024年度经营数据显示，得益于乳牛种群改良及单产提升，在成乳牛存栏数同比下降的背景下，公司原 料奶总产量同比提升1.6%。面对原料奶终端需求持续疲软的市场环境，公司采取灵活经营策略：将增 量产能重点投入犊牛精细化饲喂体系，同时通过加工为全脂奶粉进行价值转化。在此经营策略下，全年 原料奶外销总量为70.0 万吨，较2023年度的71.1万吨同比下降1.6%，整体产销结构保持良性平衡。 因2024年乳制品市场供大于求的状况未能得到有效改善，原奶售价持续走低，影响集团原料奶平均售价 同比下跌6.1个百分点至人民币4,467元╱吨(2023年：人民币4,756元╱吨)，销量与原奶售价的双重不利 因素，给集团销售收入带来明显冲击。 中国圣牧(01432)公布2024年业绩 母公司拥有人应占 亏损6549.5万元 同比盈转亏 智通财经APP讯，中国圣牧(01432)公布2024年业绩，营业收入约33.74亿元，同比减少4.1%;销售收入 31.26亿元，同比减少7.6%;母公司拥有人应占亏损6549.5万元，同比盈转亏;每股亏损0.008元。 年内，面对奶价持续下行趋势，集团通过降本增效措施与优化核心业务，实现公斤奶销 ...

Financial Performance - For the fiscal year ending December 31, 2024, the company's operating revenue decreased by 4.1% to RMB 3,374,327,000 compared to RMB 3,520,212,000 in 2023[3] - Sales revenue fell by 7.6% to RMB 3,126,184,000 from RMB 3,383,629,000 in the previous year[3] - The company reported a gross profit of RMB 925,890,000, down 9.7% from RMB 1,025,020,000 in 2023[3] - The net loss attributable to equity holders of the parent was RMB 65,495,000, compared to a profit of RMB 86,076,000 in the previous year[3] - Cash EBITDA decreased by 3.3% to RMB 957,843,000 from RMB 991,013,000 in 2023[3] - In 2024, the company achieved a total sales revenue of RMB 3,126.2 million, a decrease of 7.6% compared to RMB 3,383.6 million in 2023[62] - The company reported a loss attributable to equity holders of RMB 65,495 thousand for 2024, compared to a profit of RMB 86,076 thousand in 2023[35] - The company experienced a loss of RMB 807.3 million from changes in the fair value of biological assets, an increase of RMB 101.0 million compared to RMB 706.3 million in 2023[65] Cost Management - The cost of milk sold per kilogram decreased by 5.2% to RMB 3.14 from RMB 3.32 in the previous year[5] - The cost of goods sold for the year ended December 31, 2024, was RMB 2,200,294 thousand, compared to RMB 2,358,609 thousand in 2023, indicating a reduction in costs[30] - The total employee benefit expenses for 2024 were RMB 326,791 thousand, a decrease from RMB 377,381 thousand in 2023[32] - The company reduced logistics costs by 21.8%, with sales and distribution expenses falling to RMB 49.1 million in 2024 from RMB 62.7 million in 2023[67] Asset and Liability Management - Non-current assets totaled RMB 6,342,946,000 as of December 31, 2024, a slight decrease from RMB 6,361,869,000 in 2023[15] - Current assets amounted to RMB 2,121,306,000, down from RMB 2,155,042,000 in the previous year[15] - Total liabilities decreased to RMB 4,288,460,000 in 2024 from RMB 4,280,656,000 in 2023, indicating a stable financial position[16] - The company reported a net current liability of RMB 517,847,000, improved from RMB 867,205,000 in 2023, reflecting better liquidity management[22] - The company's non-current liabilities rose to RMB 1,649,307,000 in 2024, up from RMB 1,258,409,000 in 2023, indicating increased long-term borrowing[16] - The total bank borrowings increased to RMB 2,274,285,000 in 2024, up by 6.7% from RMB 2,131,239,000 in 2023[40] - As of December 31, 2024, total bank borrowings amounted to RMB 22,743 million, an increase from RMB 21,312 million in 2023, with net debt rising by 14.8% to RMB 12,090 million[77] Equity and Dividends - Total equity decreased slightly to RMB 4,175,792,000 in 2024 from RMB 4,236,255,000 in 2023, reflecting a minor decline in shareholder value[16] - The company did not recommend a final dividend for the fiscal year ending December 31, 2024, compared to a dividend of HKD 0.23 in 2023[3] - The proposed final dividend for the year ended December 31, 2023, is RMB 17,588 thousand, significantly lower than RMB 87,184 thousand in 2022[33] - The board does not recommend a final dividend for the fiscal year ending December 31, 2024, maintaining the previous year's dividend of 0.23 HKD[95] Operational Efficiency - The company achieved a 5.9% increase in milk yield per dairy cow to 12.05 tons per year, up from 11.38 tons[5] - Daily fresh milk production for the group reached 2,015 tons in 2024, with 21 organic certified farms producing 1,534 tons[47] - The average milk production per dairy cow reached 12.05 tons, an increase of 0.67 tons year-over-year, marking the highest level since the company's establishment[50] - The group strategically optimized its herd structure, increasing the culling rate of less productive cows while maintaining high breeding performance indicators[52] Market and Industry Trends - The average price of fresh milk in major producing provinces was RMB 3.11 per kilogram by the end of December 2024, down 15.0% year-on-year[45] - The total production of raw milk in China decreased by 2.8% in 2024, marking the first decline since 2018, with a total output of 40.79 million tons[45] - The total imports of dairy products decreased by 9.5% in 2024, totaling 2.768 million tons, marking the third consecutive year of decline[44] - The Engel coefficient for household consumption remained stable at 29.8%, indicating consistent consumer spending patterns[43] Sustainability and Corporate Governance - The company has made significant progress in digital transformation, developing an industry-first milk yield calibration model with over 95% accuracy[6] - The company joined the World Business Council for Sustainable Development (WBCSD) in 2024, enhancing its commitment to sustainable development and ESG practices[55] - The company is committed to sustainable development and plans to leverage its experience in ESG to provide more sustainable solutions in the future[57] - The company maintained compliance with all applicable environmental protection laws and regulations in 2024[84] - The company has adopted and complies with the corporate governance code as per the Hong Kong Stock Exchange regulations[90] Future Outlook - The company aims to enhance the organic milk business growth as a core objective for 2025, focusing on high-quality raw milk supply[89] - The company plans to strengthen the construction of five major milk source bases to support the liquid milk industry[89] - The company will continue to improve management and align with government strategies to meet public demand and enhance corporate value[89]

Investment Rating - The report initiates coverage with a "Buy" rating for China Shengmu [8][10]. Core Views - China Shengmu is the largest organic raw milk producer in China, focusing on upstream ranch operations and benefiting from a strong partnership with Mengniu Dairy, which holds a 29.99% stake in the company [3][8]. - The high-end organic milk market is expanding due to consumer upgrades driven by rising income levels and the emergence of a new middle class [5][30]. - The company has a unique geographical advantage in the Ulan Buh Desert, which enhances its product quality and safety, creating a competitive moat [6][65]. - The scale of operations allows the company to effectively manage risks and improve operational efficiency, particularly in the face of fluctuating feed prices [7][52]. Summary by Sections Company Overview - China Shengmu was founded in 2009 and became the first global organic raw milk stock listed in Hong Kong in 2014. The company has shifted its focus to organic raw milk production since 2018, partnering with Mengniu to enhance operational efficiency [18][21]. - The company operates a fully organic supply chain, from pasture planting to milk processing, and has received dual certification for organic standards from China and the EU [18][69]. Market Potential - The report highlights that the average per capita consumption expenditure in China has grown at a compound annual growth rate (CAGR) of 6.96% from 2010 to 2023, indicating a strong foundation for high-end milk consumption [30]. - Organic milk is becoming a popular choice among consumers due to its higher quality standards and health benefits, with the market for organic products in China expected to grow significantly [37][47]. Operational Efficiency - The company has improved its operational efficiency by focusing on large-scale ranching, which reduces the risk of disease and allows for better cost management [7][52]. - The report notes that the proportion of organic raw milk sales has increased from 41.4% in 2019 to 77% in 2023, contributing to improved profitability [25][78]. Financial Forecasts - The projected net profits for 2024 to 2026 are expected to be -80 million, -20 million, and 291 million yuan, respectively, with significant growth anticipated in 2026 [8]. - The report estimates that the price-to-earnings (P/E) ratio for 2026 will be 6 times, reflecting the company's growth potential in the organic milk sector [8].

Summary of Conference Call Company and Industry Overview - The conference call primarily discusses the dairy industry, focusing on the company's operations and financial performance in the context of milk prices, feed costs, and market dynamics [1][2][3][4][5][6][7][8][9][10][11][12][13][14][15][16][17][18][19][20][21][22][23][24][25][26][27][28]. Key Points and Arguments Milk Prices and Profitability - The company anticipates that milk prices will remain low throughout the next year, impacting overall profitability [1][2][16]. - The average milk price is projected to be around 2.4 to 2.5 RMB per kilogram, with some fluctuations observed in the market [13][14]. Feed Costs - Feed costs are expected to decrease by double digits, primarily due to lower commodity prices [2][3]. - The company estimates that feed costs will account for approximately 75% to 80% of total costs, with a projected cost of around 2.5 RMB per kilogram of milk [7][8]. Supply Chain and Inventory Management - The company has increased its inventory collection by 10% to 15% compared to the previous year, despite challenges faced by social farms [4][5]. - Social farms are reportedly operating at about 60% of their previous year's collection capacity due to financial constraints [5][6]. Financial Performance - The company reported a loss of approximately 400 million RMB in the first half of the year, with expectations for a slightly lower loss in the second half [11][12]. - The average valuation of dairy cows is around 21,000 to 30,000 RMB, which is considered low compared to industry standards [12]. Cash Flow and Capital Expenditure - The company expects operating cash flow to be around 1 billion RMB for the year, with capital expenditures projected to be around 700 to 800 million RMB [9][10]. - Future capital expenditures will primarily focus on maintenance rather than expansion, indicating a conservative approach to investment [17]. Debt and Financial Health - The company's debt ratio is approximately 50%, which is lower than the industry average, and it maintains a low financial cost of about 2.5% [14][15]. - The company has around 9 billion RMB in unused credit, indicating a strong liquidity position [15]. Market Dynamics and Future Outlook - The company anticipates a slight increase in sales volume, but overall growth will be modest, likely in the single digits [16]. - The market for specialty and organic milk is growing, with double-digit growth rates observed in these segments [26][27]. Government Support and Policy - Government subsidies for dairy farms have been limited, and while there have been some initiatives to support struggling farms, the effectiveness of these measures is questioned [19][20]. Industry Trends - The industry is experiencing a consolidation trend, with larger farms gaining market share while smaller farms face significant challenges [21][22]. - The company notes that the supply-demand imbalance in certain regions continues to affect market dynamics [22]. Additional Important Information - The company emphasizes the importance of stable sales agreements with major buyers, which helps mitigate risks associated with fluctuating milk prices [27]. - The management team has remained stable since 2019, contributing to improved governance and operational performance [24].

Operations and Production - The company operates 34 farms with a total stock of 148,000 cows, ensuring a secure milk source[3] - The annualized milk yield per milkable cow is 5.77 tonnes, reflecting the efficiency of the breeding practices[11] - Raw milk sales increased from 10.9 million tonnes in H1 2023 to 12.1 million tonnes in H1 2024, representing a growth of 10.3%[11] - The herd structure shows a significant increase in the number of milkable cows, contributing to overall production capacity[10] - The Group operated 34 farms with a total of 148,101 cows in stock as of June 30, 2024, with a 20.7% increase in fattening cows compared to the end of the previous year[24] - The Group imported over 3,600 high-quality young Holstein cows from Australia, enhancing the quality of the milkable cow herd[24] - The average annualized yield of milkable cows reached 12.07 tonnes, a year-on-year increase of 1.13 tonnes, marking a record high for the Group[27] - Raw milk sales in the first half of 2024 amounted to 0.351 million tonnes, representing a year-on-year increase of 3.2%[28] Financial Performance - The Group's raw milk sales revenue for the six months ended June 30, 2024, was RMB1,490.7 million, a decrease of 4.7% year-on-year from RMB1,565.0 million in 2023[39] - The sales volume of raw milk increased by 3.2% year-on-year to 350,848 tonnes, compared to 340,086 tonnes in 2023[39] - The average selling price of raw milk decreased by 7.7% year-on-year to RMB4,249 per tonne, down from RMB4,602 per tonne in 2023 due to supply-demand imbalances[39] - The Group's gross profit margin for the first half of 2024 was 26.5%, nearly unchanged from 26.7% in the same period of 2023[31] - The loss from changes in fair value less costs to sell of biological assets increased to RMB 451.0 million, up from RMB 286.1 million in 2023, primarily due to a significant increase in the number of inefficient cows retired and a decline in beef market prices[46] - Other income and gains rose by 89.0% to RMB 49.9 million, compared to RMB 26.4 million in 2023, mainly driven by increased government subsidies[49] - The Group's raw milk sales revenue for the period was RMB 1,490.7 million, a year-on-year decrease of 4.7% compared to RMB 1,565.0 million in 2023, despite a sales volume increase of 3.2% to 351,000 tons[40] - The cost of sales for raw milk decreased by 4.4% to RMB 1,096.2 million, down from RMB 1,146.7 million in 2023, benefiting from improved operational efficiency and reduced feed costs[41] Debt and Financing - The proportion of long-term loans increased to 65.2% in H1 2024, up from 51.4% in 2022, indicating a shift towards more stable financing[14] - Finance costs decreased from 3.65% in 2022 to 2.43% in H1 2024, showing improved cost management[14] - The Group secured China's first naturally beneficial commercial ESG-linked loan amounting to RMB100 million for a term of 2 years at an interest rate of 2.53% per annum, supporting green projects[35] - The proportion of medium- and long-term loans increased to 65.1%, indicating an optimization of the debt structure[53] - The Group maintained a credit facility of RMB10 billion, with available and unutilized credit facilities amounting to approximately RMB9,028.1 million[60] - The Group's interest-bearing bank and other borrowings increased to RMB2,486.6 million as of June 30, 2024, up from RMB2,131.2 million at the end of 2023, representing a growth of 16.7%[60] Market and Economic Context - In the first half of 2024, China's GDP reached RMB 61,683.6 billion, representing a year-on-year growth of 5.0%[18] - The total retail sales of consumer goods in China reached RMB 23,596.9 billion, with a year-on-year growth of 3.7%[18] - National milk production in the first half of 2024 was 18.56 million tonnes, representing a year-on-year increase of 620,000 tonnes or 3.4%[21] - The average price of raw fresh milk in June 2024 was RMB 3.3/kg, a decrease of 13.7% compared to the same period last year[21] - The total amount of dairy products imported into China in the first half of 2024 was 1,308,000 tonnes, representing a year-on-year decrease of 15.6%[19] Sustainability and Corporate Governance - The company's original organic ecological desert management system was recognized by the United Nations as a best practice for sustainable production[3] - Shengmu is the first raw milk brand in Mainland China to obtain dual certifications of organic standards from both domestic and EU authorities[3] - The Group joined the World Business Council for Sustainable Development (WBCSD), marking a significant step in its commitment to global sustainable development[35] - The Group's organic products won the Gold Award at the 17th Asia International Organic Products Expo, highlighting its commitment to quality[31] - The Group is committed to integrating into global competition and contributing to societal development through its operations[15] - The Group's operations complied with all material national and local environmental protection laws in the PRC during the reporting period[76] Human Resources and Management - The Group's employee count decreased to 2,187 as of June 30, 2024, down from 2,701 employees at the end of 2023, while improving efficiency metrics[36] - The Share Award Scheme resulted in the vesting of approximately 108,942,111 award shares, with an additional 99,954,000 shares vesting due to performance targets being met[37] - The Board believes the Company has complied with the Corporate Governance Code during the reporting period[88] - The Board of Directors consists of nine members, including one executive Director and five non-executive Directors[89] - The Remuneration Committee determines policies related to human resources management and reviews the Company's remuneration policies[91] Future Outlook and Strategy - The Group aims to double the sales volume of organic raw milk by 2025 compared to 2020 levels, following national and local policy guidelines[77] - The Group will focus on cost control, efficiency improvement, herd optimization, and digital innovation to enhance operational capabilities in 2024[78] - The Group plans to continue developing a variety of functional raw milk to enrich its product combination and enhance profitability[23] - The newly built smart farm in the Ulan Buh Desert Base has commenced operations, housing approximately 3,800 high-quality young Holstein cows imported from Australia, with the first batch of raw milk expected by the end of this year[33] - The Group will enhance its digital innovation capabilities and build a highly efficient supply chain for sustainable development[78]

Financial Performance - For the six months ended June 30, 2024, the company's revenue was RMB 1,567,692 thousand, a decrease of 4.6% compared to RMB 1,643,416 thousand in the same period of 2023[1] - Sales revenue for the same period was RMB 1,490,702 thousand, down 4.7% from RMB 1,565,011 thousand year-on-year[1] - The company reported a gross profit of RMB 394,509 thousand, reflecting a decline of 5.7% from RMB 418,289 thousand in the previous year[1] - The EBITDA profit increased by 9.8% to RMB 404,740 thousand, compared to RMB 368,563 thousand in the prior year[1] - The company reported a net loss of RMB 145,510,000 for the six months ended June 30, 2024, compared to a profit of RMB 21,274,000 for the same period in 2023, representing a significant decline in performance[7] - Total comprehensive loss for the period amounted to RMB 149,510,000, a stark contrast to the comprehensive income of RMB 22,274,000 in the previous year[7] - The group reported a loss attributable to equity holders of the parent company of RMB (143,681) thousand for the six months ended June 30, 2024, compared to a profit of RMB 23,327 thousand for the same period in 2023[24] Assets and Liabilities - Non-current assets totaled RMB 6,407,815,000 as of June 30, 2024, showing an increase from RMB 6,361,869,000 at the end of 2023[8] - Current assets decreased to RMB 1,649,276,000 from RMB 2,155,042,000, indicating a reduction in liquidity[8] - The company's cash and bank balances increased to RMB 626,622,000 from RMB 552,429,000, reflecting improved cash management[8] - The net current liabilities improved to RMB 660,223,000 from RMB 867,205,000, suggesting better short-term financial health[13] - Total liabilities decreased from RMB 4,236,255,000 at the end of 2023 to RMB 4,082,483,000 as of June 30, 2024, indicating a reduction in overall debt[10] - The company's equity attributable to shareholders decreased from RMB 4,023,068,000 to RMB 3,872,507,000, reflecting a decline in shareholder value[11] Operational Highlights - The sales volume for the period was 350,848 tons, representing a growth of 3.2% from 340,086 tons in the same period last year[1] - The average annual milk yield per cow reached 12.07 tons, an increase of 10.3% from 10.94 tons year-on-year[1] - The company has completed the construction of an intelligent farm in Ulanqab and Desert Base, which is now operational with approximately 3,800 dairy cows[2] - The company imported about 4,600 high-quality young Holstein cows during the period, enhancing the quality of its herd[2] - The company operated 34 farms as of June 30, 2024, with a total herd size of 148,101, showing a slight increase from 148,029 at the end of 2023[33] - The average selling price of raw milk for the group was RMB 4.25 per kilogram, a year-on-year decrease of 7.7%[35] Cost and Efficiency - The cost of goods sold for the six months ended June 30, 2024, was RMB 1,096,193 thousand, down from RMB 1,146,722 thousand in the same period of 2023[20] - The cost of milk sales per kilogram decreased by RMB 0.25 to RMB 3.12 per kilogram, with feed costs at RMB 2.51 per kilogram, down RMB 0.24 year-on-year[35] - The gross profit margin for the first half of the year was 26.5%, nearly unchanged from 26.7% in the same period of 2023[35] - The group increased the culling rate of low-efficiency cows, resulting in a 4.1% decrease in the self-breeding expansion rate[36] - The cost of sales for raw milk was RMB 1,096.2 million, down 4.4% from RMB 1,146.7 million in 2023, benefiting from improved operational efficiency and lower feed costs[40] Sustainability and ESG Initiatives - The company has joined the World Business Council for Sustainable Development (WBCSD), marking a significant step in its commitment to sustainability[3] - The group received the "ESG Disclosure Contribution Pioneer Award" for its outstanding performance in ESG and sustainability efforts[38] - The group successfully issued a green loan of RMB 100 million, marking a significant step in ESG financing in Inner Mongolia[38] Management and Governance - The company has implemented a long-term share incentive plan with a total allocation of RMB 105,000,000 over three years, with the third batch of RMB 35,000,000 granted to 62 selected participants in April 2024[28] - The audit committee consists of two independent non-executive directors and one non-executive director, with Mr. Wang Liyan as the chairman[67] - Ernst & Young has agreed to the financial data presented for the six months ending June 30, 2024, but does not provide any guarantees regarding the performance announcement[68] Market Context - In the first half of 2024, China's GDP reached RMB 61,683.6 billion, growing by 5.0% year-on-year, while retail sales of consumer goods increased by 3.7% to RMB 23,596.9 billion[29] - The dairy industry faced challenges with a 3.0% year-on-year decline in production from large-scale dairy manufacturers, totaling 14.33 million tons in the first half of 2024[29] - The average price of raw milk in major producing provinces was RMB 3.3 per kg in June 2024, down 13.7% year-on-year, marking the longest continuous decline in 28 months[30]

Summary of the Conference Call Industry Involved - The discussion focuses on the dairy industry, specifically the upstream (farms) and downstream (dairy enterprises) sectors of dairy products [1]. Core Points and Arguments - The team has been researching the dairy sector for a considerable time, indicating a long-term interest and expertise in this area [1]. - There is a noted correlation between the profitability cycles of dairy farms and dairy companies with the price cycles of dairy products [1]. - In the second quarter, there has been a year-on-year decline in dairy product production, suggesting potential challenges in the industry [1]. Other Important but Possibly Overlooked Content - The mention of the profitability cycle and price cycle correlation implies that market conditions may significantly impact future earnings for companies in the dairy sector [1].

Summary of Conference Call Company/Industry Involved - The conference call pertains to the Washington Securities and the Chinese Saint Mother Gold Mine industry Core Points and Arguments - The meeting is exclusively for professional investment institutions or invited clients of Washington Securities, indicating a focus on institutional investors [1] - All participants are currently muted, suggesting a controlled environment for information dissemination [1] - A disclaimer is read at the beginning, emphasizing that the opinions expressed are personal and do not constitute investment advice [1] - The meeting is regulated to avoid the exchange of sensitive insider information, highlighting compliance with regulatory standards [1] Other Important but Possibly Overlooked Content - The structure of the meeting indicates a formal approach to investor relations, which may reflect the company's commitment to transparency and regulatory adherence [1] - The mention of third-party experts suggests that external insights may be provided, which could add value to the discussion [1]

Financial Performance - In 2023, China Shengmu recorded revenue of RMB3,383.6 million, representing a year-on-year increase of 6.5%[9] - The Group achieved cash EBITDA of RMB991.0 million, with a net profit of RMB94.6 million, maintaining a relatively high net profit margin in the industry[10] - Sales revenue for the year ended December 31, 2023, was RMB3,383.6 million, an increase from RMB3,176.3 million in 2022[74] - For the year ended 31 December 2023, profit attributable to owners of the parent company was RMB 86.1 million, a decrease of RMB 330.4 million compared to RMB 416.5 million in 2022[110][112] - Gross profit for 2023 was RMB1,025.0 million, with a gross profit margin of 30.3%, down from 31.9% in 2022[75] Milk Production and Sales - The total milk yield increased, with 548,000 tonnes of organic raw milk sold during the year[13] - In 2023, the Group's organic raw milk sales volume increased by 19.7%, accounting for 77.0% of total raw milk sales[33] - The sales volume of organic raw milk was 0.548 million tonnes, marking a 19.7% increase from the corresponding period, with organic raw milk sales accounting for 77.0% of total raw milk sales[131] - The milk yield of milkable cows reached 11.38 tonnes, an increase of approximately 0.86 tonnes compared to the previous period, the highest level since the Group's establishment[131] Operational Efficiency and Strategy - The Group's operational efficiency was enhanced through digital transformation and ESG sustainability initiatives, receiving multiple awards for its efforts[14] - The Group continues to prioritize cost control and operational efficiency amidst a challenging market environment[27] - The Group will focus on cost control, efficiency improvement, herd optimization, and farm digitization to enhance operational capabilities[116] - The Group aims to double the sales volume of organic raw milk by 2025 compared to 2020 levels, leveraging unique resources from the Ulan Buh Desert[116] Herd Management - The number of organic cows in stock reached 96,165, with a strategic import of approximately 3,800 Australian cows to enhance herd quality[13] - The herd size increased to 148,029 heads, up from 136,344 heads in the previous year, with notable growth in fattening cows and calves[24] - The Group strategically retired inefficient cows, resulting in approximately 47.0% of the herd being milkable cows[44] - The overall quality of the herd has significantly improved, with the proportion of lactating cows at approximately 47.0%[152] Financial Position and Borrowings - As of December 31, 2023, the Group's outstanding interest-bearing borrowings amounted to RMB2,131.2 million, up from RMB1,840.2 million in 2022, with net borrowings increasing by 18.2% to RMB1,053.4 million[71] - The Group's total equity as of December 31, 2023, was RMB4,236.3 million, slightly down from RMB4,261.7 million in 2022[71] - The financial gearing ratio was 51.5%, up from 43.5% in 2022[71] Cost and Expenses - The cost of sales for raw milk amounted to RMB 2,358.6 million, representing a 9.0% increase from RMB 2,163.6 million in 2022[57] - The selling and distribution expenses rose to RMB 62.7 million, an increase of 13.7% compared to RMB 55.2 million in 2022[62] - The Group's total employee costs in 2023 amounted to RMB377.4 million, an increase from RMB330.7 million in 2022[32] - Administrative expenses increased by 18.0% to RMB166.3 million, accounting for 4.9% of sales revenue compared to 4.4% in 2022[83] Share and Equity Management - As of December 31, 2023, there were 230,986,988 award shares outstanding under the Share Award Scheme, representing 2.8% of the Company's issued shares[32] - The proposed final dividend for the year ended December 31, 2023, is HKD0.23 per ordinary share, down from HKD1.13 in 2022[119] - The Group's available reserves as of December 31, 2023, amount to RMB3,474.4 million, a decrease from RMB3,569.3 million in 2022[121] Market and Industry Context - The average price of raw milk decreased by 4.9% year-on-year to RMB4,756 per ton in 2023, down from RMB4,998 per ton in 2022[34] - The total volume of imported dairy products into China decreased significantly for two consecutive years, with a 12.0% year-on-year decrease in 2023[41] - The average price of fresh raw milk in primary dairy-producing provinces was RMB3.66/kg in the last week of December 2023, a decrease of 11.2% compared to the previous year[42] Corporate Governance and Compliance - The Group's operations complied with all applicable national and local environmental protection laws and regulations in 2023[93] - The Group is exposed to various business risks, including financial, regulatory, environmental, and natural risks[117] - The Company has adopted a Share Award Scheme effective from April 19, 2022, where shares will be purchased by a professional trustee on the market[199] Future Outlook - The 2024 Policy on Promoting High-Quality Development of the Milk Industry emphasizes stabilizing high-quality milk supply and increasing subsidies for forage storage[116] - The demonstration zone will cooperate with Mengniu Deluxe Milk brand to build the world's first desert oasis farm of Deluxe Milk[154]