Inner Mongolia Yili Industrial Group Co. Ltd.

The stable outlook reflects our expectation that Yili will expand at 10%-15% annually over the next 18-24 months. Growth will be driven by the expansion of the liquid milk segment, the introduction of new products, and increased demand for good quality dairy products. Furthermore, we expect Yili to maintain an EBITDA margin of 10%-12%, leverage of 1.2x-1.4x, and generate positive free cash flow over the period. We could lower the ratings if Yili's debt-to-EBITDA ratio approaches 1.5x. This could happen if: The company's debt-funded acquisitions or shareholder-friendly activities are higher than we expect; or Its sales and profitability materially weaken--for instance if EBITDA margin declines below 8%--due to intensified competition or major product safety issues. We could also lower the

...Rising consumer demand will drive volume growth. Inner Mongolia Yili Industrial Group Co. Ltd.'s (Yili's) sales should outpace China's GDP growth over the next two years, driven by rising dairy consumption as disposable incomes expand. A growing focus on wellness and government advocation should also boost dairy demand after the pandemic. We anticipate Yili's revenue will rise 10%-15% in the next 12-24 months mainly supported by volume growth complemented by an improvement in product mix. The company's growth will be supported by its nationwide sales network, effective marketing strategy, and strong research and development (R&D) capabilities....

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