China Modern Dairy Holdings Ltd.

Overview Key strengths Key risks Strong commitment and likelihood of support from a parent with solid credit profile. Client and product concentration. Largest supplier of raw milk to parent under long-term contracts. Margin compression with rising feed costs. Productivity enhancement with improving unit yield. Liquidity is a key constraint to stand-alone credit profile. China Modern Dairy Holdings Ltd. (CMD) to receive strong support from its parent, China Mengniu Dairy Co. Ltd. (Mengniu). Mengniu controls CMD with a 56% interest and CMD is integral to the parent's business and growth strategy. We anticipate Mengniu will extend timely support to CMD when needed because the former cannot easily replace CMD's supply without jeopardizing its own operations. During the last downturn in 2017,

.... Mengniu controls CMD with a 56% interest and CMD is integral to the parent's business and growth strategy. We anticipate Mengniu will extend timely support to CMD when needed because the former cannot easily replace CMD's supply without jeopardizing its own operations. During the last downturn in 2017, Mengniu supported CMD by raising its shareholding and injecting liquidity. CMD is the largest raw milk supplier accounting for one third of Mengniu's volume. The company's production sites, operations, and future development are highly integrated with that of Mengniu. For example, CMD's five-year growth plan shadows Mengniu's growth ambitions....

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