Inner Mongolia Yili Industrial Group Co.,Ltd. released its 2025 interim report. In H1 2025, the company achieved revenue of RMB 61.777 billion, up 3.49% year-over-year; net profit attributable to shareholders was RMB 7.2 billion, down 4.39% year-over-year; adjusted net profit attributable to shareholders was RMB 7.016 billion, up 31.78% year-over-year. For Q2 alone, revenue reached RMB 28.838 billion, up 5.9% year-over-year; net profit attributable to shareholders was RMB 2.326 billion, up 44.65% year-over-year; adjusted net profit attributable to shareholders was RMB 2.387 billion, up 49.48% year-over-year.
**Revenue Growth Driven by Low-Temperature Products, Milk Powder, and Ice Cream**
Q2 2025 revenue growth turned positive. By product segment, liquid milk achieved revenue of RMB 16.485 billion, down 0.85% year-over-year. While room-temperature milk continued to face operational pressure amid weak demand, the decline narrowed significantly due to the low base from destocking in the same period last year. Low-temperature liquid milk grew against the trend, with the "Changqing" brand achieving double-digit growth in H1 2025 and low-temperature white milk growing over 20%.
Milk powder and dairy products achieved revenue of RMB 7.765 billion, up 9.65% year-over-year. The infant formula business benefited from industry recovery and enhanced competitiveness, achieving strong growth. Adult nutrition products and cheese also gained market share with steady growth.
Ice cream products achieved revenue of RMB 4.124 billion, up 37.96% year-over-year. Higher temperatures this summer and recovering consumer spending drove industry recovery, with the company's frozen products showing strong recovery from a low base.
**Impairment Provisions Contracted as Expected, Operational Efficiency Improved**
Q2 2025 gross margin was 34.19%, up 0.61 percentage points year-over-year, mainly due to cost benefits and increased proportion of high-margin businesses like milk powder. Sales/administrative/R&D/financial expense ratios were 19.92%/3.78%/0.66%/-0.75%, changing by -0.71/+0.51/-0.06/-0.49 percentage points year-over-year respectively.
In H1 2025, advertising and marketing expense ratio decreased 0.95 percentage points year-over-year, the main driver of sales expense ratio improvement, as precision marketing enhanced cost efficiency. Scale benefits also drove fee optimization, with overall expense ratio down 0.76 percentage points year-over-year.
Meanwhile, losses related to excess raw milk, such as bulk powder impairment, factoring risk provisions, and small loan loss provisions, decreased. Credit impairment losses and asset impairment losses as a percentage of revenue decreased 1.14 and 0.78 percentage points respectively year-over-year, collectively boosting profitability by 1.92 percentage points.
Although external donations in non-operating expenses increased, raising their proportion of revenue by 1.1 percentage points year-over-year, net profit margin ultimately reached 7.94% under multiple positive factors, up 2 percentage points year-over-year. Adjusted performance was even better, with adjusted net profit margin up 2.41 percentage points year-over-year to 8.28%.
**H2 Outlook: Revenue Growth Tools Available, Profitability Improvement Trend Clear**
Although industry demand remains subdued, leading player Inner Mongolia Yili Industrial Group has healthy room-temperature milk inventory and low-temperature innovative products driving growth, with the core business expected to remain relatively stable. Additionally, infant formula demand is recovering with enhanced competitiveness, adult powder cultivation is showing initial results, cheese has dual BC-driven growth, and ice cream business is expected to continue strong performance from last year's low base, providing sufficient tools for steady revenue growth.
On the profitability front, after impairment provisions and related destocking expenses in 2024, the company is now operating with a lighter burden. Q2 profitability improved as expected with outstanding growth. With the green storage season approaching in Q3, upstream dairy cow inventory is expected to accelerate depletion, milk prices are expected to gradually stabilize, and the company's related impairment pressure is expected to significantly contract accordingly, making the profitability improvement trend clear.
**Risk Warnings** Demand recovery below expectations, intensified industry competition, continued decline in raw milk prices, etc.
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