On the evening of November 28, Bright Dairy & Food Co., Ltd. announced plans to acquire a 40% stake in Qinghai Xiaoxiniu Biological Dairy Co., Ltd. (hereinafter referred to as "Xiaoxiniu") for 500 million yuan. Investors have raised concerns about the high valuation of Xiaoxiniu, which also failed to meet its performance commitments.
Against the backdrop of declining raw milk prices, Bright Dairy's core liquid milk business has seen shrinking revenues, with the company reporting a net loss of 130 million yuan in Q3 2025. Its previous acquisition, Synlait Milk, has not become a second growth driver but instead dragged down performance due to persistent losses.
With Bright Dairy already highly leveraged—its cash at the end of Q3 barely covering short-term debt—the cash acquisition raises questions about its financial impact.
**Is the 500M Yuan Acquisition of Xiaoxiniu Overvalued?** In October 2021, Bright Dairy acquired a 60% stake in Xiaoxiniu for 612 million yuan, with an agreement that after the performance commitment period (2022–2024), both Bright Dairy and original shareholder Huzhou Fuxin would have purchase and sell options, respectively. Four years later, Bright Dairy now plans to acquire the remaining 40% stake from Huzhou Fuxin, Wang Weisheng, and Zhang Yuqin.
Xiaoxiniu, based in Qinghai, specializes in dairy R&D, production, and sales, offering products such as "Qinghai Traditional Yogurt," "Tibetan Plateau" series yogurt, "Xiaoxiniu" pure milk, and "Tuolunbao" pure milk.
According to the announcement, Xiaoxiniu generated 617 million yuan in revenue and 89.42 million yuan in net profit in 2024. From January to August 2025, its revenue was 353 million yuan, with net profit at 26.22 million yuan. The 500 million yuan acquisition implies a valuation of approximately 1.25 billion yuan for Xiaoxiniu. Based on 2024 net profit, the deal's P/E ratio stands at about 13.98x. However, Xiaoxiniu's revenue and profit for the first eight months of 2025 show significant contraction.
Comparatively, among 19 listed dairy firms in the A-share market, Manor Dairy—with 2024 revenue of 890 million yuan, similar to Xiaoxiniu—has a market cap of 2.192 billion yuan, suggesting Xiaoxiniu's valuation may not be low.
Notably, Xiaoxiniu failed to meet its 2022–2024 cumulative performance commitment of 93.32%, with promised non-GAAP net profits of 84.56 million yuan, 95.97 million yuan, and 108.93 million yuan, respectively.
**Core Business Struggles, Q3 Losses** Bright Dairy has been grappling with the fallout from past acquisitions. In September 2025, it announced plans to sell Synlait's North Island assets for $170 million (1.21 billion yuan) due to underutilization and heavy losses. The sale, including a 40,000-ton infant formula plant and packaging lines, is expected to boost Synlait's FY2026 net profit by 10–15 million NZD and improve liquidity.
Synlait, acquired in 2010, expanded aggressively but faced slowing growth and losses from 2021 due to COVID-19, rising raw milk prices, and shipping costs. Disputes with major client a2 Milk further strained performance. In 2024, Bright Dairy injected NZD 185 million into Synlait via a private placement and extended NZD 130 million in loans—totaling ~1.358 billion yuan—adding to its own financial stress.
As of Q3 2025, Bright Dairy held 3.161 billion yuan in cash against 2.911 billion yuan in short-term debt, leaving minimal liquidity buffer. Revenue for the first nine months fell 0.99% YoY to 18.231 billion yuan, while net profit dropped 25.05% to 87.21 million yuan, with a razor-thin net margin of 0.33%.
**Industry-Wide Pressures** Raw milk prices have declined for four straight years, down nearly 30% since October 2021. According to the Ministry of Agriculture, average purchasing prices in major dairy provinces fell 2.9% YoY to 3.04 yuan/kg in October 2025. Oversupply, stagnant demand, and rising cow productivity have driven the slump.
Bright Dairy's liquid milk revenue, its core business, shrank 9.47% in 2024 (down 17% from 2021) and another 8.57% in Jan–Sep 2025. Overseas losses and asset impairments further dragged results.
Gross margins, once at 31.28% in 2019, fell to 19.23% in 2024 and 17.65% in Jan–Sep 2025, hitting just 15.04% in Q3—down 3 percentage points YoY. Management attributed this to intensified competition and a higher mix of low-margin products.
While Bright Dairy's expense ratio (16.04%) is lower than peers like Yili, Sanyuan, and New Hope Dairy, its low gross margins result in significantly weaker net profitability.
Facing product stagnation, weak core growth, and limited regional penetration beyond East China, Bright Dairy's latest acquisition raises questions: Will it be a lifeline or another burden?
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