Core Viewpoint - The recent share reduction by UDL, the actual controller of New Dairy Industry, has raised concerns among investors, as it marks the first time the controlling party has sold shares since the company's IPO. This move is speculated to be linked to financial pressures from another company, Flying Horse International, which is facing significant performance compensation obligations [1][3][4]. Group 1: Share Reduction Details - UDL holds 65.07% of New Dairy Industry and plans to reduce its stake by up to 25.82 million shares, representing no more than 3% of the total share capital, potentially amounting to nearly 500 million RMB [1]. - The reduction is not substantial given that UDL and her father, Liu Yonghao, collectively own nearly 80% of the shares [1][3]. - This is the first instance of share reduction since the company's listing, indicating a significant shift in the controlling party's strategy [3][4]. Group 2: Financial Context of Flying Horse International - Flying Horse International, also controlled by Liu Yonghao, announced plans to transfer its controlling rights amid financial difficulties, including a commitment to cover a performance shortfall of approximately 437 million RMB by July 2025 [5][14]. - The company has been struggling with negative cash flow and significant debt, with liabilities reaching 877 million RMB and cash reserves below 100 million RMB [14][15]. - The performance commitments made by the controlling party are under scrutiny, as the company has not met its profit targets since the acquisition [12][13]. Group 3: Market Performance and Valuation - New Dairy Industry's stock price has increased by 24.36% year-to-date, reaching a high valuation with a TTM P/E ratio of 26.15, significantly above the industry average of 19 [18][19]. - The company's revenue from its primary market in Southwest China has declined by 6.51%, raising concerns about brand strength and market position [31]. - The profit growth of New Dairy Industry has been largely attributed to decreasing raw material prices, which may not be sustainable if prices rebound [25][32]. Group 4: Strategic Implications - The timing and amount of UDL's share reduction appear strategically aligned with the financial needs arising from Flying Horse International's obligations, suggesting a potential interconnection between the two companies [16][30]. - New Dairy Industry's high valuation may be difficult to maintain if revenue growth does not stabilize, especially given the competitive pressures from larger industry players [32][33]. - The company has a significant goodwill of 1 billion RMB, which could pose risks if raw milk prices rise or competition intensifies [33].

Core Viewpoint - The dairy industry is experiencing a significant downturn in 2024, with a notable decline in revenue and net profit among listed companies, attributed to oversupply, weak demand, and high inventory levels [1][2]. Group 1: Industry Performance - In 2023, 19 listed dairy companies in A-shares achieved total revenue of 184.83 billion yuan, a year-on-year decrease of 7.44% [1]. - The total net profit for these companies fell from 13.10 billion yuan to 9.58 billion yuan, representing a 27% decline [1][2]. - 14 out of 19 companies reported a decrease in revenue, compared to only 6 the previous year [1]. Group 2: Key Companies - Yili Group reported a net profit of 8.45 billion yuan, but experienced an 8.24% decline in revenue and an 18.94% drop in net profit, marking its first instance of dual decline [2]. - Other liquid milk companies, such as Bright Dairy and San Yuan, saw net profit declines of 25.36% and 77.44%, respectively [2]. - Five dairy companies reported losses, including Huangshi Group, Zhuangyuan Pasture, and Xibu Dairy, an increase of two companies from the previous year [2][4]. Group 3: Growth and Resilience - Only 6 companies reported net profit growth, including Beingmate, Pinwo Food, Miaokelando, Yiming Food, New Dairy, and Hairong Technology [3]. - New Dairy has maintained double-digit growth in net profit in recent years, despite a 2.93% revenue decline in 2024 [3][4]. - New Dairy's focus on low-temperature fresh milk and yogurt products has allowed it to avoid intense competition and benefit from rising penetration rates of low-temperature products [4].