Core Viewpoint - Miaokelando's net profit attributable to shareholders for Q1-Q3 2025 reached 176 million yuan, representing a year-on-year increase of 107%, with Q3 net profit alone soaring to 43 million yuan, a staggering increase of 420% [1] Financial Performance - The significant profit increase is attributed to a decline in raw material costs and product structure optimization, which enhanced gross margins [1] - Government subsidies, investment income, and net other income also contributed to the year-on-year growth [1] Product Strategy - The company has developed a differentiated product matrix targeting various consumer groups, including growth cups for children, cheese small particles for young consumers, cheese triangles, and ginseng yogurt for the elderly [1] - This diverse product offering is expected to meet the consumption needs of different demographics and potentially lead to significant scale contributions in the future [1] Market Position and Outlook - The company is viewed positively as a leading player in the cheese sector, with plans to expand its ambient cheese stick product line to tap into new market opportunities [1] - The synergy between BC channels is expected to solidify the company's market share, alongside stringent cost control measures that will continue to optimize profitability [1] - The investment rating is maintained at "Buy" [1]

Summary of Miao Ke Lan Duo Conference Call Company Overview - **Company**: Miao Ke Lan Duo - **Industry**: Dairy Products, specifically Cheese Key Financial Performance - **Revenue**: In the first half of 2025, Miao Ke Lan Duo achieved revenue of 2.567 billion yuan, a year-on-year increase of 7.98% [3] - **Net Profit**: The net profit attributable to shareholders was 1.133 billion yuan, up 86.27% year-on-year [3] - **Cheese Segment Revenue**: Revenue from the cheese segment was 2.136 billion yuan, reflecting a 14.85% increase, with a gross margin of 35.25%, down 1.5 percentage points [3] - **Trade Business Revenue**: Revenue from trade business was 230 million yuan, a 3.69% increase, with a gross margin of 4.73%, up 3 percentage points [3] - **Liquid Milk Revenue**: Revenue from liquid milk was 187 million yuan, a 0.63% increase, with a gross margin of 8.7%, up 1.63 percentage points [3] Growth Drivers - **Cheese Business**: The cheese business is identified as the growth engine, with the catering industrial series revenue growing by 36.2% and the family dining series by 28.44% [2][5] - **Market Demand**: Strong market demand is evident, with the cheese market in China experiencing a significant annual compound growth rate of 24% [2][7] Market Position - **Market Share**: Miao Ke Lan Duo's market share increased to 27%, surpassing Bai Ji Fu to become the leading brand in the Chinese market [2][9] - **Competition**: The market is still dominated by foreign brands, but domestic brands like Mengniu and Duomeixian hold a combined 40% market share, indicating potential for further growth [9] Strategic Initiatives - **Channel Optimization**: The company is optimizing its distribution channels by integrating Mengniu's dual-brand advantages and expanding into emerging channels such as baking and maternal-infant markets [2][6] - **E-commerce Focus**: Miao Ke Lan Duo is deepening its presence on traditional e-commerce platforms like JD, Tmall, and Pinduoduo, while also developing new platforms like Douyin and Kuaishou [2][6] - **B2B Transformation**: The company is transitioning its B2B catering channels towards professional dairy service providers, enhancing its service capabilities for large clients [6] Product Innovation - **New Product Development**: The introduction of room-temperature cheese sticks addresses the challenges of low-temperature transportation and expands consumption scenarios for children [10][11] - **Product Line**: The company has a diverse product line, including ready-to-eat nutrition series, family dining series, and catering industrial series [11] Collaboration with Mengniu - **Strategic Partnership**: Miao Ke Lan Duo has a long-term cooperative relationship with Mengniu, providing cheese OEM services and benefiting from Mengniu's global procurement advantages [12] - **Synergies**: The collaboration enhances procurement, R&D, production, and sales, leveraging Mengniu's resources to improve efficiency and expand market reach [12] Market Trends - **Consumer Behavior**: There is a noticeable shift in consumer preferences from liquid milk to healthier yogurt and cheese products, indicating growth potential for the cheese market [2][7] - **Comparative Analysis**: Compared to Japan and South Korea, China's cheese market is still in its infancy, with significant room for growth as consumer habits evolve [8] Future Outlook - **Growth Strategy**: Miao Ke Lan Duo aims to extend its product offerings into the snack market, transitioning from dairy products to leisure snacks [14] - **Trade Business Expansion**: The company plans to introduce high-quality raw milk products into the domestic market, creating synergies with its core business [14] - **Long-term Prospects**: The overall outlook for Miao Ke Lan Duo is positive, with expectations for continued growth and market leadership in the cheese sector [14]

Core Viewpoint - Despite expectations of consumer recovery, Miao Ke Lan Duo, a leading cheese brand, is facing growth bottlenecks, as evidenced by its declining revenue and profit figures in the latest quarterly report [1][3]. Financial Performance - In Q1, Miao Ke Lan Duo reported revenue of 1.023 billion yuan, a year-on-year decrease of 20.47%, and a net profit of 24.2 million yuan, down 67.08% year-on-year [1]. - For the full year of 2022, the company experienced a revenue growth of only 7.84%, while net profit and non-recurring net profit fell by 12.32% and 45.14%, respectively [3]. - The company's stock price has halved in less than a year, reaching a historical low of 23.47 yuan per share [3]. Market Challenges - Miao Ke Lan Duo's cheese sales are increasingly difficult, with quarterly revenue growth rates declining from 35.2% to -25% over the past year [4]. - The company attributes its performance issues to logistics disruptions, rising raw material costs, intensified competition, and weak consumer demand [4]. - The cost of goods sold for the cheese business increased by 33.54% to 2.293 billion yuan, leading to a significant drop in gross margin by 7.78 percentage points to 40.48% [4]. Market Dynamics - The retail scale of China's cheese market grew to 14.294 billion yuan in 2022, but the growth rate slowed to 8.9%, indicating a shrinking incremental market for Miao Ke Lan Duo, which holds a 32.7% market share [4]. - A declining birth rate poses a long-term concern for cheese products aimed at children, as evidenced by a drop in birth rates from 18.83 million in 2016 to 10.62 million in 2021 [5]. Competitive Landscape - The cheese stick market has seen a price war since 2020, with discounts ranging from 50% to 80%, making it increasingly challenging for Miao Ke Lan Duo to sell its products [6]. - Despite maintaining a revenue growth of 16% in its cheese business in 2022, the core instant nutrition series saw a slight revenue decline of 0.6% [6]. - Miao Ke Lan Duo's sales expense ratio increased from 16.74% in 2018 to 25.24% in 2022, while revenue growth slowed from 63.2% in 2020 to 7.84% in 2022 [6]. Strategic Initiatives - To address market challenges, Miao Ke Lan Duo launched a line of ambient cheese sticks in 2021, aiming to expand its reach in lower-tier markets [7]. - The company is attempting to replicate the success of the ambient yogurt brand Mosliyan, which achieved significant sales growth before facing competition [7]. - Miao Ke Lan Duo's distribution network is limited compared to competitors like Yili, which has a much larger number of retail outlets and distributors [8]. Distribution and Channel Management - As of 2022, 71.7% of Miao Ke Lan Duo's revenue came from distribution channels, with a net decrease of 145 distributors during the year [8]. - In Q1 of the current year, the number of distributors further declined by 53, attributed to a strategic decision to optimize distributor quality [9]. - The management believes that specialized cheese distributors may perform better than those who also sell liquid milk, indicating a potential shift in channel strategy [9].

Core Viewpoint - The Chinese dairy industry is undergoing a deep adjustment period, with traditional liquid milk consumption growth slowing down, while cheese is emerging as a high-growth segment driven by consumption upgrades and policy support, becoming a new battleground for leading dairy companies [1][2]. Industry Overview - The dairy sector has shown significant differentiation in the capital market, with traditional liquid milk giants like Yili and Mengniu experiencing stock price declines of around 3% to 4%, while companies like China Feihe and Miaokelando in the cheese segment have seen stock price increases of over 5% and 64% respectively, indicating positive market expectations for cheese [1]. - The cheese market in China is still in its early development stage, with a current consumer penetration rate of less than one-third, significantly lower than that of low-temperature yogurt [2][4]. Company Performance - Miaokelando reported a revenue of 1.233 billion yuan in Q1, a year-on-year increase of 6.26%, with a net profit of 82.4 million yuan, marking a substantial year-on-year growth of 114.88% [4]. - The company aims to achieve a cumulative revenue of no less than 19.9 billion yuan and a net profit of no less than 990 million yuan from 2025 to 2027, reflecting confidence in consumer recovery and industry growth [6]. Market Dynamics - The current low price of raw milk presents a rare opportunity for companies to optimize their cost structures, with the average price of fresh milk in major production areas dropping to 3.06 yuan per kilogram, a decrease of 8.4% year-on-year [4][5]. - The dairy industry has entered a phase of oversupply since 2018, primarily due to a lack of product diversity and saturation in overall milk consumption [4]. Strategic Initiatives - Miaokelando is focusing on enhancing its cheese production capabilities, with plans for a new factory in Jilin expected to be operational next year to improve supply chain efficiency and cost competitiveness [2]. - The company is adopting a dual strategy targeting both B-end (industrial catering) and C-end (household consumption) markets, with C-end expected to contribute approximately 65% and B-end around 35% of its business by 2024 [7]. Retail Trends - The retail landscape is undergoing significant changes, with emerging channels like membership stores and snack retailers gaining traction, prompting Miaokelando to adapt its strategies to align with these trends [7]. - The company is committed to deepening its engagement with new retail channels and optimizing traditional e-commerce operations to capture market opportunities [8].