On September 11-12, 2024, China Modern Dairy Holdings Ltd. (1117.HK) successfully hosted a reverse roadshow in Urad Qianqi, Inner Mongolia, attracting numerous institutional investors and analysts. The event aimed to showcase the operations of the company's Ulan Buh Organic Industrial Park and Modern Grassland, providing investors with comprehensive insights into the organic business.

Modern Dairy completed the investment and consolidation of four organic farms in July this year. Currently, the Uraq Qianqi high-end dairy industrial park has five organic farms in operation, covering a total area of 13,000 mu. The designed stocking capacity is 60,000 heads, with an actual stocking of 45,000 heads in 2024, producing 500 tons of fresh milk daily. Significantly, the farming area is located in the golden milk source belt between 35° and 45° north latitude and within a desert area, providing a natural isolation zone that ensures a pure and pollution-free environment.

Mr. Zhu Xiaohui, CFO, introduces investors to the layout of High-end Dairy Industrial Park in Urad Qianqi

During the event, Mr. Zhu Xiaohui, Chief Financial Officer of Modern Dairy, personally led investors on a tour of Ulan Buh Farm III. This farm covers an area of 1,703 mu with a total construction area of 320,000 square meters. It is designed to house 18,000 dairy cows and currently has 10,000 head, producing 109 tons of fresh milk daily. Mr. Zhu detailed the farm's "two centralized, six unified" management model, which includes centralized manure treatment, centralized cow entry and exit, unified planting, unified feed, unified services, unified monitoring, unified digital intelligence, and unified epidemic prevention, achieving closed-loop management across the entire industrial chain. The farm is equipped with advanced milk component analyzers, ensuring a 100% pass rate for fresh milk through precise instrument control. The farm also utilizes modern equipment such as a 100-stall rotary milking parlor and fishbone milking parlors. These devices not only adapt to various herd sizes but also feature milk yield identification, estrus monitoring, and high-precision milking metering systems with a measurement error within 0.01%.

Mr. Cheng Guangping, General Manager of Organic Region, explains to investors the full-chain management concept of "from grass to glass."

After touring the milking facilities, Mr. Zhu directed investors' attention to another equally crucial aspect – forage planting and management. He emphasized that high-quality feed is the foundation for producing premium organic milk. Currently, 150,000 mu of forage is planted around the organic farms, including 100,000 mu of silage and 50,000 mu of corn. The planting area is expected to reach 200,000 mu by 2025. Imported alfalfa, oats, and corn are managed through a combination of self-cultivation and importation. The cultivated feed strictly adheres to both EU and national organic standards. Mr. Zhu led investors to observe the silage acquisition, silage fermentation, and feed storage processes firsthand, and elaborated on each session of feed management, including planting planning, quality control, and storage techniques, emphasizing the importance of high-quality feed for producing premium organic milk. He also explained how scientific feed ratios improve milk yield and quality and ensure the sustainability of feed supply.

An investor forum was also held during the event. Mr. Zhu comprehensively explained Modern Dairy's development strategy for the organic industrial park and provided an in-depth analysis of the international dairy market and domestic supply and demand situation. He pointed out that due to stagnant raw milk production growth in major exporting countries, strong demand from Africa, Southeast Asia, and the Middle East has offset China's decline in imports, leading to a rebound in international milk prices after bottoming out in the third quarter of 2023. Future domestic demand will primarily rely on domestic milk sources. Domestically, due to expanding industry losses, capacity reduction began at the beginning of the year. As of July, the number of dairy cows in major producing provinces has been reduced by 200,000 to 300,000. Furthermore, high summer temperatures led to a high single-digit decline in milk production from June to August compared to the first half of the year. On the demand side, dairy companies began stocking up for the "double festivals" in September, with processing volume expected to increase by 20%-30%, in addition to the daily consumption of 5,000-6,000 tons of raw milk for the student milk program. The effects of capacity reduction are becoming apparent, with the price of raw milk rising from less than 1 yuan to 3 yuan/kg.

Ms. Wang Hongliu, Director of the Dairy Division of the Inner Mongolia Autonomous Region Department of Agriculture and Animal Husbandry, also delivered an important speech at the forum. Director Wang stated that Inner Mongolia, as a major dairy province, will retain high-quality production capacity while reducing overall capacity. She introduced that Inner Mongolia has successively introduced policies such as "Dairy 7 Articles," "Dairy 9 Articles," and "Dairy 33 Articles" in recent years. These policies support the development of the dairy industry across the entire industrial chain, from forage planting and breeding to deep processing. Director Wang also introduced Inner Mongolia's initiatives to reduce dairy costs, including promoting the domestic substitution of imported alfalfa and encouraging farms to purchase locally to reduce transportation costs. Finally, Director Wang emphasized that addressing dairy industry issues requires nationwide efforts and called for joint efforts from all parties to promote the sustainable and healthy development of China's dairy industry.

Through this reverse roadshow, investors gained in-depth understanding of Modern Dairy's organic industrial park layout, operational model, and the domestic and international dairy landscape, providing them with a more comprehensive and clear understanding of the company's development strategy and future prospects. Modern Dairy will continue to uphold its philosophy of "Deploy the whole industry chain, innovate with digital intelligence and be a global dairy farming leader". The company will continuously increase the proportion of specialty milk, actively expand the high-end raw milk market, improve operational efficiency, strengthen quality control, create greater value for shareholders, and make greater contributions to the prosperous development of China's dairy industry.