China Youran Dairy Group Limited (Youran Dairy) disclosed that its wholly owned subsidiary, Inner Mongolia Youran, has entered into a Live Cattle Procurement Framework Agreement with Inner Mongolia Yizhiniu Animal Husbandry (Yizhiniu), a wholly owned subsidiary of Yili Industrial Group, on 22 May 2026. The deal covers Angus cattle deliveries from 22 May 2026 to 31 December 2028.
Under the agreement, Inner Mongolia Youran will supply Angus cattle—positioned as premium, high-marbling beef—to Yizhiniu. Pricing follows a “cost-plus” formula: [procurement cost + (daily feed cost + RMB 7.43 fixed daily cost per head) × days in pen] × (1 + 6%). Yizhiniu must settle invoices within ten working days of receipt.
No revenue is expected in 2026 because cattle will still be in the fattening phase. Annual transaction caps are set at RMB 36.00 million for 2027 and RMB 72.00 million for 2028, incorporating a 20% buffer for potential cost and volume fluctuations. There is no historical precedent for similar transactions between the parties.
Given Yili’s status as Youran Dairy’s controlling shareholder and Yizhiniu’s full ownership by Yili, the arrangement constitutes a continuing connected transaction under Hong Kong Listing Rules. Applicable percentage ratios exceed 0.1% but are below 5%, triggering reporting, annual review and announcement obligations yet exempting the deal from independent shareholders’ approval.
Management cites several strategic benefits: 1) capitalising on China’s growing beef demand—production reached 8.01 million tonnes in 2025, up 2.8% year-on-year; 2) mitigating supply risks amid 2026-2028 safeguard measures on imported beef; 3) leveraging Youran Dairy’s existing ranch resources, feed formulations and breeding expertise to enter premium beef cattle farming; and 4) securing a stable off-take channel via Yizhiniu, which is expanding in high-end catering and retail markets.
To safeguard shareholder interests, Youran Dairy has implemented multilayered internal controls, including pre-transaction price verification by the finance department, dual business-finance review at settlement, annual auditor oversight of compliance with pricing policies and caps, and real-time monitoring to prevent cap overruns. Two non-executive directors linked to Yili abstained from voting on the board resolution; all remaining directors, including independents, deem the terms fair, reasonable and in the ordinary course of business.
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