Weaker consumer sentiment, cheaper dairy products, and consumers trading down are weighing on Yili?s sales. We see lower volume and selling prices as smaller producers spur competition and gain market share. Total revenue dropped 9.5% in the first half of 2024. Liquid milk (two thirds of sales) revenue dropped 13%. We therefore lower our topline forecast to a decline of 5% in 2024 from low-single-digit growth previously. Yili may book a recovery in the second half after cleaning up channel inventories in the first half. An earlier Chinese New Year in 2025 could pull forward stocking up by distributors to late 2024, to meet gifting demand. Raw milk oversupply could extend well into 2025, pushing down input costs. Recent herd-culling
