Core Viewpoint - Knight Dairy has faced significant penalties due to substantial losses in futures trading and failure to disclose this information in a timely manner, leading to warnings and fines from regulatory authorities [1][3][4]. Group 1: Financial Losses and Penalties - In 2024, Knight Dairy engaged in futures trading for commodities such as soybean meal, sugar, and urea, resulting in cumulative losses of up to 41.12% of its 2023 audited net profit by the end of the year [2][3]. - The total penalties imposed by the Inner Mongolia Securities Regulatory Bureau amount to 3.4 million yuan, with specific fines for the chairman and other executives totaling 340,000 yuan [1][3]. - As of January 17, 2024, the cumulative losses from futures trading reached 902.46 million yuan, representing 12.60% of the 2022 audited net profit [2]. Group 2: Company Operations and Strategy - Knight Dairy, established in 1992, operates across the entire dairy supply chain, including feed crop planting, dairy farming, dairy processing, and sugar production, and was listed on the Beijing Stock Exchange in October 2023 [5][6]. - The company has been increasing investments in upstream industries, aiming to expand its sugar project and optimize its agricultural and dairy supply chain over the next 3-5 years [5][6]. - Despite a decline in milk prices, Knight Dairy has continued to invest in its livestock business, with recent capital injections into its wholly-owned subsidiary [6]. Group 3: Market Environment and Risks - The dairy industry has been facing challenges, with milk prices in major producing provinces averaging 3.32 yuan per kilogram in 2024, a decrease of 13.5% year-on-year [7]. - The sugar market is also volatile, influenced by futures market fluctuations, natural disasters, and policies from major importing and exporting countries, which can lead to revenue instability [7].

Core Viewpoint - Knight Dairy experienced its first loss in nearly a decade in 2024, with a net profit of -7.70 million yuan, attributed to multiple factors including declining product prices and increased costs [2][3]. Financial Performance - In 2023, Knight Dairy's revenue grew by 32.55% to 1.256 billion yuan, and net profit increased by 31.03% to 93.85 million yuan [2]. - In 2024, the company reported revenue of 1.297 billion yuan, a year-on-year increase of 3.22%, but net profit turned negative at -7.70 million yuan [2]. - The decline in revenue was noted in key product lines such as fresh milk, low-temperature yogurt, and white sugar, while only the OEM milk powder business saw growth [2]. Reasons for Loss - The chairman attributed the loss to several factors: declining prices of fresh milk, increased costs of white sugar due to low sugar content in raw materials, significant losses in futures trading, low prices in the breeding industry, and impairment of biological assets [2][3]. - The company faced issues with its earnings forecast due to not adequately considering the impact of milk prices on the value of biological assets, leading to a significant revision of its profit forecast [3]. Industry Context - The fresh milk price has been in a downward trend for over 30 months, remaining below cost, which has affected the profitability of the industry [4]. - The increase in supply during the spring milk production season, coupled with weak consumer demand, has contributed to the recent decline in fresh milk prices [4]. Strategic Moves - Despite the challenging market conditions, Knight Dairy has been increasing its investment in the livestock sector, including a series of capital increases in its subsidiary, Kubuqi Ranch [4][5]. - The company has engaged in multiple rounds of capital increases, raising the registered capital of Kubuqi Ranch from 170 million yuan to 250 million yuan [4]. - Future plans include focusing on refined management, improving raw material quality, and enhancing product diversity and market competitiveness [5].