On August 25, 2026, China Modern Dairy Holdings Ltd (1117.HK) delivered a standout interim report card amid the headwinds of an industry cycle adjustment. For the first half of the year, the company generated revenue of RMB 6.593 billion, an increase of 8.6% year-on-year, while net profit reached RMB 42 million, marking a strong return to profitability after a loss in the same period last year.

Even more striking, operating cash flow jumped 56.8% year-on-year to RMB 769 million, and cash EBITDA grew 8.3% to RMB 1.599 billion, underscoring a significant strengthening of the company's self-funding capacity and financial foundation. Although domestic raw milk prices remain on a downward trajectory year-on-year, the industry's supply-demand dynamics are showing signs of improvement. Combined with a steady recovery in beef prices, China Modern Dairy has leveraged its full industrial chain synergies and meticulous management practices to convert external pressures into opportunities for internal efficiency gains.

During the period, the cost per kilogram of milk sold fell to RMB 2.29, down 1.3% year-on-year, with core feed costs compressed to RMB 1.76, a 1.7% reduction. Coupled with higher culling cow prices and an actively optimized culling schedule, the loss from changes in fair value of dairy cows less selling costs narrowed dramatically by RMB 1.06 billion, becoming a key driver behind the return to profitability. On the financial structure front, the company proactively adjusted its herd composition and exercised disciplined capital expenditure, cutting capex by 33.8% year-on-year to RMB 695 million. At the same time, it seized the window of declining interest rates, bringing its comprehensive financing cost rate down to 3.21%—the lowest level in its history—thereby freeing up greater financial headroom for future growth.

As of the end of June, China Modern Dairy's total dairy cow inventory surpassed 460,000 head, with the proportion of milking cows rising to 60.1%, a structural optimization that directly boosted operational efficiency. Annualized milk yield per milking cow reached 13.3 tons, while total raw milk production increased 7.1% year-on-year to 1.78 million tons. In response to unexpected external challenges such as the South African type 1 foot-and-mouth disease outbreak, the company activated comprehensive prevention and control mechanisms across its standardized pasture management system, implementing closed-farm protocols and precise resource allocation to minimize impact and safeguard raw milk supply security.

Diversified businesses are emerging as a new growth engine. Revenue from the dairy farming comprehensive solutions segment reached RMB 1.194 billion in the first half, up 18.9% year-on-year, with its revenue share expanding to 18.1%. The forage segment's supply capacity has been steadily enhanced, the "Ai Yang Niu" trading platform maintains industry-leading transaction volumes, and the "Yun Yang Niu" system now covers over 1.5 million dairy cows. In research and development, the company independently developed China's first commercial 45K dairy cow liquid-phase genome chip, the "Modern No. 1," and has bred 24 bulls independently. Meanwhile, capitalizing on the rebound in beef prices and growing demand for veal calves, it has differentiated its dairy-meat synergy business to open up incremental growth space.

Digital transformation is accelerating, with smart pastures, smart supply chains, and an intelligent industrial synergy system taking shape, as data and AI technologies penetrate deep into pasture management and industrial chain service scenarios. Overseas markets have also delivered positive news—the company has provided technical management services for pastures in Indonesia, with supply chain support business gradually expanding to Southeast Asia, the Middle East, Japan, and South Korea, bringing Chinese dairy management expertise to the global stage. Particularly noteworthy is China Modern Dairy's breakthroughs in the ESG arena. In the first half of 2026, its MSCI ESG rating was upgraded from A to AA, tying with Mengniu for the top ranking in China's food industry. Its S&P Global CSA score jumped 25% year-on-year, placing it in the top 7% of the industry, and it was included in the S&P Global Sustainability Yearbook for the first time, being named "Industry Mover." The Wind ESG rating also maintained its AA level. This series of authoritative recognitions reflects the company's long-term commitment to green and low-carbon practices, governance effectiveness, and social responsibility.

At a critical juncture in the industry cycle, China Modern Dairy stated that in the second half of the year, it will continue to focus on its core dairy farming business, enhance raw milk production efficiency, deepen full industrial chain synergies, accelerate digital service exports, and actively explore overseas markets—steadily advancing toward its vision of becoming a global dairy industry leader with more resilient profitability and abundant cash flow. This interim report card is not just a story of one company's counter-cyclical breakthrough; it also underscores the solid foundation of China's dairy industry on its path toward high-quality development.