Investors, good morning. Welcome to China Mengniu Dairy Company Limited and Yashili International Holdings Limited 2021 Interim Results Announcement. This announcement will be conducted in Mandarin, and we have arranged English simultaneous interpretation. I am Willow from Investor Relations Department. Let me introduce to you our management in attendance, Mr. Lu Minfang, President and Executive Director, Mr. Meng Fanjie, Vice President and Executive Director, CFO Mr. Zhang Ping, Senior Vice President Mr. Gao Fei, Vice President Mr. Wen Yongping, Vice President Mr. Gao Yan, Vice President Mr. Li Pengcheng, and Assistant Vice President Ms. Feng Xian, Financial Controller and Company Secretary Mr. Kwok Wai Cheong. From Yashili, we have Mr. Yan Zhiyuan, CEO and Executive Director, and CFO Mr. Chen Limin. Let me take you through our agenda for today. First of all, Mr. Lu Minfang will take you through Mengniu's 2021 interim results and the latest development. After that, Mr. Yan Zhiyuan of Yashili will take you through Yashili's 2021 interim results for the first half. After the presentation, there will be a Q&A session. You may ask questions by dialing in, and you are most welcome to ask questions and make remarks. If you have questions, please press star one to get into the Q&A session. Now, I will pass the floor to Mr. Lu. Mr. Lu will go through Mengniu's 2021 interim results. Thank you, Willow. Investors, good morning. I remember that at the beginning of the year when we made announcements, my last remark at that time was, now Mengniu has the 14th Five-Year Plan. I'm going to go through the prospect of the 14th Five-Year Plan. Regarding Mengniu's team, I think it is now in the best condition. Today, we are presenting half-year results. Perhaps last night you have read the results already. This year is the beginning year of our 14th Five-Year Plan. Results today have given us a very good start. Page five of the PPT. In the first half, results are very good, and in various categories, these results reinforced our leading position. When we talk about digital marketing, R&D innovation, milk source, acquisition and consolidation, organization structure, in these five areas, we have enhanced ourselves. We have, one, the attention of more and more consumers. This is in line with our strategic direction, and so this is a very good manifestation of the implementation of our strategy. Now let me talk about our first-half results. In 2020 first half, there was the pandemic impact, so the results could not really be comparable. Here we have set out the first half results of 2019 so that you can have some reference. You can see that in 2021 first half, our key financial indicators after the pandemic have recovered strongly, they actually exceeded the pre-pandemic level by a large margin. This is because after the pandemic, there is heightened health and nutrition awareness among people, we also seized the opportunity of consumption upgrading to implement our five-year strategy. In the first half, revenue was CNY 45.9 billion, up 22.3% year-on-year, it includes the consolidation of Aice. Even if we do not include that, our revenue growth was 21.3%. This is the fastest growth in the past 5 years, we exceeded our budget or estimate at the beginning of the year a lot. Revenue growth was driven by sales growth and also product mix upgrading. Sales volume increased 16%. Product structure has driven an increase in price by about 6%, our results should be sustainable. In the first half of the year, there is big increase in milk price. This is because in the first half, demand was very good and then supply was relatively tight together with the upstream feedstock cost increase. In the first half of the year, milk price has risen by a double-digit. There is a 4 percentage point impact on our gross margin. However, we upgraded our product portfolio and we strictly controlled our discount rate and also other raw material costs. In the first half of the year, our GP margin was 38.2%, down 0.8 percentage point year-on-year. Our operating profit margin, 6.1%, more or less the same as first half 2019, much better than first half last year. If you talk about the net profit margin, it also has increased significantly. Our profit attributable to equity holders, CNY 2.947 billion. Net profit margin 6.4%, up 1.2 percentage point comparing with first half 2019. Next page. Let me talk about our various businesses. If you look at revenue of various categories, well, in the past, this is the first time that all categories achieved double-digit growth. Liquid milk grew very strongly, and it is the fastest growth in recent years. The main driver is UHT milk and fresh milk strong growth. For our pure milk, growth was more than 20%. Milk Deluxe grows more than 40%, fresh milk achieved a growth of 120%. For chilled yogurt, now given the decline in the overall industry, we still are able to achieve a high single-digit growth, and we led the industry in this regard. This growth is from increase in demand, and at the same time, we kept on building our brands, innovating our products, and dig deeper into the channels, and that is the good result. Our ice cream business, it grew 34.8%. Our self-owned business, up 16% year-on-year, which is very good in the first half. There is the Aice brand from Southeast Asia, we acquired it, and in the second quarter, it contributed a revenue of CNY 380 million. Milk powder, well, last year, we had Yashili and Bellamy's consolidation, they grew 11.6% year-on-year. The other businesses, mainly cheese and butter, they achieved almost 100% strong growth. If you look at all our categories, they performed very well. If we look at our financial indicators or performance, here, free cash flow CNY 2.7 billion, better than last year, better than 2019. Cash flow from operations basically increased slightly from last year. In the first half, in order to ensure raw milk supply, we made a prepayment. Operating cash flow is still very healthy. This year, CapEx increased. We want to support our strategic goal for the next five years. We invested more in expanding expansion. In the first half, CapEx was CNY 2.5 billion, much bigger than same period of last year. At the beginning of this year, we said that our capacity utilization reached a relatively high level. The next round of capacity expansion should be now. In the future, we need to expedite our fresh milk and cheese business. In our new investment and capacity expansion, 40% of the CapEx is invested in new businesses, for example, fresh milk and cheese. Our sales and distribution expenses. You may be concerned about it. Comparing with last year, we are down, and comparing with 2019, there's some improvement from 22.7 to 28.1. For our administrative expenses, because our revenue grew fast, the share of administrative expenses of revenue came down to 3.6%. This is quite a good leveraging in terms of our top-line growth. Operating efficiency. Well, all these indicators are healthy, no matter whether you look at inventory or receivables or payables turnover. We have achieved big improvement. For payables, there is some decline because prepayment of milk price in order to ensure stable supply. If you look at our various business indicators, financial indicators, in the first half of the year, they're all healthy. If you look at revenue and profit, they exceeded our expectation. In the first half of the year, our business results are really very good. Now let me do a review with you on where our growth came from. Let me be more specific. The pandemic is really challenging on all fronts. After the pandemic, there is increase in raw material price and so on. However, there are opportunities on the consumption end. Consumption of dairy products is being upgraded, so in terms of brand upgrading, innovative products, product portfolio moving towards the medium to high end, and so on. These have driven our good business growth. At the same time, we are talking about omni-channel balanced development. For UHT and chilled liquid milk, they performed relatively better. In the upstream this year, you know that we have made some moves, for example, Modern Dairy's consolidation and also Fuyuan. We also increased shareholding in Shengmu. These are strategic in nature. The overall layout in relation to milk source is more reliable and stable. This is in line with our growth. If you talk about high-end organic milk and also China Modern Dairy's acquisition of Muye, I think all these are important initiatives for us in the first half. Another important point is that in 2021, we carried out digital and smart transformation, they are centered around consumers, channels, supply chain, and management. These have enhanced our efficiency and also lowered our operating costs. If you look at various segments, our UHT business is the most outstanding. We showed the fastest growth in the past five years. Our white milk, no matter whether we're talking about basic white milk or our Milk Deluxe, the growth was very strong. For Milk Deluxe, we have upgraded and innovated. We have launched the Dream Cap series and also organic projects. Very often the products are sold out. Our overall market share has been enhanced by 60 basis points to 28.8%. For our new channels, including expansion in villages and towns, and also lower tier cities, we have achieved good results. We have product upgrading and a lot of iterations for our UHT milk and other beverage items. We have launched various new products. In the first half, the UHT segment is very good. Similarly, we continue to talk about our new businesses. We would like to report to you about our new business growth. In terms of our fresh milk and cheese business continue to grow. For fresh milk business, we have realized a growth of 120% for net revenue. Basically in three years, we were able to increase our market share from 11.2% to 13.1%. In the meantime, in different channels such as JD, Sam's Club, and Yonghui Superstores, we have realized the number one sales. Shiny Meadow grew over 120%, further strengthen its leading position in the high-end fresh milk market. In addition, in terms of our product innovation, we have launched the Shiny Meadow A2 Fresh Milk, 4.0-gram milk protein fresh milk, as well as the mini package milk tea to explore the fresh milk category opportunities and further upgrading. I have heard that in the JD channels quite a few of these different products are being sold very well and they're very popular. For cheese business, it is also similar. For the first half of this year, it grew by 68%. For retail cheese, it grew by 90%. In terms of restaurant cheese, and it has grown over 30%. For our Mengniu Cheese Sticks, as well as various leisure cheese products, they continue to expand the new consumption scenarios. In addition, we continue to look for opportunities in the new restaurant business, bakery, and the new tea drink business. For instance, our cold whipping cream and the cream cheese, et cetera, we have seen good results. In July this year, we have officially become the controlling shareholder in Milkground, and we have continued to solidify our leading position in the cheese category. Going forward, we'll continue to further utilize the advantages of both sides and continue to expand and explore the potential in both China and the rest of the world cheese market. For first half of this year, we have two products and they were not doing very well last year, but this year we have seen very good growth. In terms of our chilled business and chilled yogurt, as well as the chilled probiotic drinks, and we have realized 7% growth and especially for Yoyi C as well as Yourui, these two brands, we have realized a growth of over 20%. These are our focus this year in terms of our promotion of the brands as well as the channels. We have seen good results. In the meantime, because of our high-end chilled business growth and our profitability has also become very well. In terms of the ice cream business, and we can see that as we have said, apart from our own growth, we have acquired Aice, this ice cream brand. Even during the pandemic for Aice, their business has also seen very good progress. For these two parts of the businesses, I believe that we're catching up quite well. In addition, with respect to our formula business and for the formula business, for Yashili's business, the biggest highlight is the adult milk and which is growing by over 90% and has become the new growth point for our business. Again, we have been able to grasp the opportunity in the industry for the adult milk formula business. As for the second half of the year, we'll be able to become number 1 in the market. In terms of baby formula, we have completed our upgrading, even if we have only realized a small single-digit growth. However, with the current backdrop, I believe that our baby formula business is growing very in a stable fashion. Looking at various people's different demands, we have supplied various different products to the market. For instance, the M8 children's growth formula. This is targeted at specific population groups. For Bellamy's people, pay attention to this. For Bellamy's, in China, the offline growth is actually quite good and we see continued market share increase in the cross-border sector. For Australia, however, because of the lockdown and the buying agent business has been affected, therefore, for the first half of this year, due to the pandemic and its business growth is actually negative. This has had some impact on us. However, for the second half of the year, because we have the cross-border platinum, organic A2, as well as the Chinese version, EquiPure infant milk formula, we believe that for the second half of the year, we'll see very good growth. This is a very simple introduction on our business. Now I'd like to go back to the strategy that we have mentioned in the beginning of the year, which is to create a new Mengniu in five years, and which is in first choice of the consumers, international, responsible. We have the spirit of the culture and driven by technology, Mengniu. We are now on the cusp of the new five-year plan, and we are implementing this plan. Going forward, I will very quickly talk to you about the highlights in these different areas. In addition, we also discussed about the building of the five core capabilities. For instance, we have the digitalized marketing control over raw milk, M&A integration, organizational assurance, R&D, innovation. We continue to push forward the development in these regards, and these are also the driving force for our growth in the first half of this year. This time, I would also like to spend some time on ESGs. I believe that we had already reported on this in Mengniu's board meeting. We had specifically established a sustainable development committee, and I am the head of that committee. This is to push forward the ESG strategy. For the first time, we have included ESG goals into management KPIs. We would need to continue to improve and elevate the importance of ESG work, to make sure that the ESG performance is as closely connected with the performance of the management and the company. You know that for ESG, actually, since last year to this year, we have achieved quite a bit. We have added another eight national-level green factories. In total, we now have 17. Actually, we can see that we have two smart manufacturing digitalized factories, which are certified by the Ministry of Industry and Information Technology. In addition, we have also been selected in the top 30 of Hang Seng Sustainable Development Enterprises Index, we're one of the very few mainland food companies to be included in this index. In addition, we have also responded to the CDP climate change questionnaire. We have been ranked the first among the Chinese dairy companies in the FAIRR Protein Producer Index. We have also made great progress in terms of green financing as well as raising poverty alleviation bonds of CNY 500 million. You can see that we have achieved good results, but we will continue to implement the ESG strategy. The second part that I'd like to talk about is about the green transformation. Whilst responding to the national carbon neutral strategy goal, we can see that for Mengniu, starting from 2018, we have started our carbon inventory pilot work. At the moment, we are already working on devising the specific green gas reduction plan, starting from 2022, we will be announcing our carbon reduction goals as well as pathways. In the meantime, we have also joined the Pathway to Dairy Net Zero Initiative, and we will be working together to push forward the low-carbon transformation in the global dairy industry and to continue to promote the devising of a standard of carbon-neutral in the Chinese dairy industry. Perhaps, you also pay attention to the outlook of the whole year. We still believe that there are more opportunities than challenges. For the consumers, they continue to focus on health and nutrition. This is pushing forward the long-term growth of our industry. In the meantime, we also believe that there is still a lot to do in terms of channel penetration of lower-tier cities. In addition, we believe that in terms of the marketing and brand communication model changes due to digitalized lifestyle, commanding the transformation of a Route-to-Market models. Even if in the second half of the year, there is still the pandemic. In terms of the milk price, there could be some challenges, but I still believe in the long-term growth in Mengniu. For the whole year, we are full of confidence, and we're also looking forward to the future development in the next few years. We believe that for the whole year, we would perform better compared to the guidance from the capital market. Finally, I would like to thank the investors for your support and the attention you give to us. Thank you. Now, we will pass the floor to Mr. Yan Zhiyuan of Yashili. He will present to you Yashili's results. Thank you, Mr. Lu. Investors, good morning. Let me report to you Yashili's interim results. In the first half of the year, actually from 2017 onwards, our net profit has improved a lot. In 2021, we continued to have profit. We reached a high growth of double digits. Actually, we grew to 44.2%. Revenue was up 31.1% year-on-year. This is because of resumption of offline activities of the group and bigger investment into the industry. We dig deeper into different market segments and niches. As a result, we enjoy good growth. For gross profits, more or less the same as previous periods. There are some decline because in the first half of the year, we enhanced some investments, comparing with the same period. In terms of segment of revenue, we can look at this from a few different perspectives in terms of branded milk powder. For the first half of the year, we have realized revenue of CNY 1.8 billion, up by 44.3%, accounting for 86.3% of the revenue. You can see that our core business has seen very good growth. In terms of consign processing base powder and finished product, that is a decrease of 33.2%. We need to continue to eliminate some of the categories which are quite low. For dissolvable products, we're up 23.6%. This is quite a good growth. For other businesses, actually, you can see consign processing, which is down by 6.7 percentage points. In the first half of the year, we achieved growth because of a branded milk powder, achieving 44.3% growth. Sales and administrative expenses. Selling and distribution expenses ratio in 2020 first half, 26.8%. It rose to 30.7% in first half 2021. There is a few percentage points increase because in the first half of the year, we made investment into our brand. Last year, our main investment was in second half. As a result, there is an increase by 3.9 percentage points, our gross profit was slightly affected. Regarding administrative expenses, comparing with same period last year, it is more or less the same, 5.6%. Let me talk about our operating efficiency indicators. First, inventory turnover days, down from 149 to 136 days. This is a good result. While we achieved high growth, we are able to improve our operating efficiency. The inventory turnover days continued to decrease. Receivables turnover days, down from 19 to 16 days this year. For adult milk powder, it was subject to bigger impact. In fact, you can see this decrease because we have improved our credit period. Payables turnover, more or less the same as last year, same period. Cash flows and CapEx. Let me report a few of these indicators. Regarding cash flow, in the first half of the year, net cash flow from operating activity, CNY 504 million. In order to meet all our sales needs, we have increased our inventory. Secondly, because of the rapid increase in adult milk powder. These are the two reasons causing this result. For CapEx. In the first half of the year, CNY 96 million. Again, this is because of increase in capacity and the associated investments. The above are the financial indicators. If we look at various categories, we kept on rebranding for infant formula milk powder, and we want to strengthen our brand advantages. The structure is much better. Reeborne was awarded the 13th Five-Year Plan key research project results certificate. For Arla Baby & Me, we signed with Liu Tao as the new endorser, so we are going to see good growth. With respect to children's milk powder, with what we already have, and we have now launched M8, which is a new product, and with the new product launch, we have realized a growth of 50%. At the moment, Mr. Deng Chao is the brand ambassador. We have also started the public experiencing campaign event, and it has been well-received in the market by the consumers. In terms of adult milk powder, this year we have done well. In terms of the mass market segment, we have seen great growth, which has outperformed the industry average. In the meantime, we have also launched high-end, middle-aged, and elderly milk powder, which is Yourui. We have signed Mr. Zhang Guoli as the new brand ambassador. For the first half of this year, we have realized a year-on-year growth of 94% of net revenue. This is quite a good result. R&D innovation has supported the growth that we had just mentioned, we can see that there is continuous improvement in the R&D standard and the capability as well as our product quality. We currently have our self-owned R&D, as well as a collaboration of R&D with our partners. This is a system that we have already established. In terms of adult powder sectors, we have been very innovative and to launch the high-end, various different elderly milk formula products. In terms of baby formula, we have also added a new baby formula. In the meantime, working with Arla, we have launched the world's first A2 organic formula to meet consumers' demands. In the meantime, we have also launched M2, which is a milk formula with probiotics, with breast milk probiotics. You can see that there is a lot of high technology involved in here, this shows the great result of our innovation of our products as well as our R&D. In terms of digitalization development, as you can see that we have a very detailed plan for our digitalization. Through the innovation of the model and the strong user operation platform application and strong data mining, we were able to increase the user's value and reduce the channel cost and improve efficiency. We have seen very good result in this regard. In the second half of this year and in the future, for our digitalization strategies, we'll continue to push it forward to create more value for the company as well as to bring better experience to the consumers. I have very simply walked you through with respect to the first half of the performance of the company. In terms of the outlook for the second half of this year, we can see that the new national standards, this will be launched, and this will continue to raise the industry competition barrier. In addition, the government has launched various policies to reduce the burdens of raising children. We can also see that aging population and increasing life standards, as well as higher health awareness, all of this will continue to drive the growth in the middle-aged and elderly milk powder market. We continue to see diversified consumption demands leading to emerging channels and new marketing formats. With this backdrop, for the first half of this year, on the basis of the good performance that we have achieved, for the second half of this year, we will continue to build on the very solid foundation and to grasp policy opportunities to further explore new growth models with strategic focus in terms of nutrition for all these different products composition. We'll continue to upgrade the nutritional product portfolio and to realize diversification. This is our guidance for the second half of the year, and this is a brief introduction of Yashili for 2021. Thank you, Mr. Lu and Mr. Yan. Now we'll move on to Q&A. We will first handle Chinese questions, followed by English questions. If you have questions, on the telephone conferencing system, please follow the operator's instruction. That is, please press star one, please also state your name and the organization you represent. Operator, can we start Q&A, please? Thank you. Wei Xiaopo from Citibank. Management, can you hear me? Yes. Good morning, management. I have three questions. In the first half of the year, your results are excellent. However, the structure is different from that in the beginning of the year. Top line is very strong. However, because of raw milk cost, there is pressure coming from strong demand. For the whole year, you said that the situation will be better than the guidance. There is top-line guidance and EBIT margin guidance. Mr. Lu, what do you mean? Can you elaborate more? Second, for Q3, China's macro economy is complicated. If you look at some macro indicators, including retail figures, where there is slowdown and there are natural disasters and pandemic outbreaks. What will be the impact on dairy products? For some products, your competitors have adjusted price. Are you going to keep the same operating strategy? Will you continue to move forward, or are you going to adjust price in an opportunistic way? Can you explain? My last question is, there are quite a lot of investments. For example, cheese will be your major focus. Can you give us a framework? How are you going to cooperate in an all-round perspective with some other company? Thank you. That is Milkground. Thank you. Okay, guidance. Top line is going to be better than expectation. Last year, we gave a guidance for this year, 12%, right? Growth should be 12%. Now, we will be better than expectation. This is for sure. I think you are more concerned about margin improvements. Right now, we still believe that the margin improvement guidance will not change. We need to think about the extent, but then the trend will not change. In other words, in the second half, operating profit margin will still improve based on our established strategy. In the first half, milk price is a challenge, but comparing with 2019, we are still able to achieve 6.1%, which is quite good. In the first half, milk price increase was more than 15 points. In the second half, we believe that the increase will slow down a bit. Our margin will improve according to our established strategy. The second question, about third quarter situation. Right now, in July and August, usually, that's a slow season for dairy product consumption. However, with our good structure and layout, including our new products being quite good, we believe that in the second half of the year, our growth would be in line with our strategy. For price adjustment for UHT white milk, in July, we adjusted price once. That is in order to alleviate the challenge from the increase in raw milk price. We are optimistic about the market. Through Mengniu's strategic arrangement and layout, we hope to maintain high growth. About synergy with Milkground. You can see that Milkground has announced their half-yearly results, which are good in terms of growth and also profit and revenue growth. Profit growth is good. A lot of synergy will come from our supply chain synergy. For example, our talent empowerment and also synergy in various channels. Mengniu's cheese is relatively better. Actually, we can complement each other. In the area of cheese, I think Mengniu plus Milkground will surpass market growth a lot. We are able to make this cheese segment bigger and stronger in China. Thank you. I would like to follow up. EBIT margin reference point is still 2019, right? Yes. Thank you. Thank you, Mr. Lu. We now welcome Lillian Lou from Morgan Stanley. Thank you, Mr. Lu and Mr. Zhang, dear management team. I have two questions. The first one is to follow up with Mr. Lu's response, in terms of the profit margin. For second half of this year, it is expected that compared with 2019, there will be an improvement, my understanding of this is that perhaps it would still come from the gross margin improvement. Just now, Mr. Lu has talked about the rise in terms of the milk prices. For the second half of this year, in terms of your expenses, what is your plan? This is about the gross margins, a further follow-up question. The second question I have is with respect to some of the product structures. For first half of this year, white milk has grown quite well, so is chilled. Overall, the improvement is quite good. In terms of UHT yogurt, in this sector, what is the performance this year? What is your view on the UHT yogurt as well as the chilled yogurt? For the second half of this year, what sort of changes will there be? Also a very small technical question, perhaps, Mr. Zhang, from a financial perspective, can you please help us look at this in terms of capital expenses? We can see there is a CNY 100 million equity investment. In the meantime, for the long-term financial assets, we can also see that there is an increase of CNY 4 billion. Is this the same thing? What is this CNY 100 million equity investment? Can you please elaborate? Thank you. Well, with respect to margin, your understanding is correct. At the moment for the second half of this year, of course, our growth margin will improve. In terms of net profit, we hope that we can maintain it at the same level, because the core products are the ones that are driving our core growth. These are some of the very important categories for our business units that we would continue to put further investment. Second, because of the investment into these product categories, you can see this has led to the different product structure changes including Yoyi C or Milk Deluxe, et cetera. These are all categories which has a higher margin than the average of the profit margin of the company as well as cheese. All of these categories are the ones that we are very bullish on. We don't think that we will bring down the expenses, but we do think that our growth margin will continue to improve. Apologies that there is one question with respect to UHT yogurt and the chilled yogurt. Well, UHT yogurt for first half of the year, we have realized a single-digit growth, and I think that this reflects the consumer's needs. Because for chilled yogurt, whether it is from the efficiency or the product, actually, they are more in line with the consumption habits going forward. For the UHT yogurt, and it is now being over-treated as drinks, and I think that it takes time to correct this concept. Whether it is UHT yogurt that should be upgraded or the chilled yogurt will become normalized in the market to be accepted. I think this will take some time, but in the chilled yogurt, we continue to be the leader in the market in that sector. Thank you. With respect to the last question, first of all, in our announcement, in terms of the CapEx, does not include any M&A. This is mainly in our fixed assets or some intangible asset investment. It does not include any M&A. This is point one. Second, you ask about our balance sheet and in terms of the other financial assets. Under this, is about CNY 16 billion. This would include two parts. The first part is through banks, and we have pledged some loans with the upstream. Second, we also have some principal guaranteed deposits, and that is also being included in here. Thank you, Mr. Zhang. Just one follow-up, and that is one equity investment, which is CNY 4.12 billion. What kind of equity investment is this? This CNY 4.1 billion, one is for Milkground investment, and second, for first half of this year, we have also further increased our shareholding in Shengmu. Okay, great. Thank you. Thank you, Mr. Zhang and Mr. Lu. Zhou Chen from Bank of America Merrill Lynch. Thank you, Mr. Lu, Mr. Zhang, and management. I have three questions. First, a follow-up on a previous question. For second half this year, what is growth rate of revenue and profit? What is your forecast? Can you give more details? For the five-year strategy, you want to multiply your sales. Every year, what will be the growth? Right now, there is impact from the pandemic and economy. In the second half, are you confident of achieving a more normal situation? Next question is about your white milk. Now, in the first half, Milk Deluxe was still able to achieve almost 40% growth. At this pace, based on my estimate, next year, Milk Deluxe should be able to reach a scale of CNY 30 billion. It will be the number one single item in Chinese dairy product industry. For this product or brand, what will be the ceiling of its growth and scale? Your basic white milk, you achieved very strong growth as well. In the past few years, the base was higher. In the coming one to two years for white milk growth, what do you think will be its sustainability? The third question is for Mr. Yan of Yashili. Concerning milk formula or milk powder, well, the market is rather pessimistic about the overall industry. In the first half, for adult milk powder, growth was fast. Concerning adult milk powder, how much is Yashili's share? In the future, what is the development strategy? For infant milk formula, in the first half, it seems that there is not much increase in market share. In the future, what measures are you going to adopt in order to increase market share? These are my three questions. Thank you. First question, I will answer it. Second question will be answered by Gao Fei. Third question, Mr. Yan. Okay, first question. We need to look at growth from an overall perspective. Internally, we have made some estimates. If we look at 2019, 2020, and 2021 growth, in 2020, growth was based on a lower base. That's why the result. Last year in the second half, it is a growth based on a high base in 2019. In the second half of this year, again, based on a high base in 2020, we will achieve double-digit growth. If you take an overall view, basically, 15% average growth is already a fast growth trend. What I mean is, this trend is something we can expect in the second half of this year and also next year and the year after next year. We are not particularly concerned about whether the growth is 10% or 12% in the second half. I know that you need to come up with a model. However, unless if I show you the whole financial statements and accounts, otherwise, I need to look at the medium-to-long-term growth forecast. Now, we set the 14th Five-Year Plan strategy, basically, we have to grow at this pace. Of course, we have to achieve it by means of short-term actions, but we are more optimistic about medium-to-long-term growth through structure, high-end development, and innovation. We can launch new product categories and new products, and then we will upgrade and transform existing businesses to achieve the growth. From this perspective, I believe that our current growth is very healthy. It is not true that we all of a sudden achieve high growth. Actually, we have been upgrading ourselves to achieve the growth. The next question will be taken by Gao Fei about growth in white milk. Greetings. Let me answer the question on Milk Deluxe white milk. In the overall cycle, white milk and Milk Deluxe grew fast. Last year and this year, I think you have seen the trend for white milk. I think it is related to the big trend of being health and nutrition conscious. The whole atmosphere is very prosperous, and so the growth is promising and good. For Milk Deluxe and white milk, basically, we rely on brand investment and product innovation and upgrading. These are some growth drivers. This year, for Milk Deluxe, it has been upgraded, and the whole Dream Cap series has been launched in an expanded way. There are new products being launched. In terms of upgrading and also iteration and product investment, these are some growth drivers. In this stage, Milk Deluxe has achieved good growth. For white milk, in the first half of the year grew well. The growth was a high double-digit figure. It is very good. Again, people have big demand for nutritional products, and they are more health conscious. If we look at the channel structure this year, the penetration capability is much stronger. In the past, we did a lot of work in terms of channels. With these factors, in the first half of the year, growth was fast. In the second half this year, milk price rose fast, and it continued to rise. For increase in milk price, of course, there is impact on us. In the second half regarding white milk and Milk Deluxe, we are going to make some adjustment for the price. That's basically it. Okay. You talked about milk powder. Let me explain. Is it true that the industry is a bit pessimistic? I think we need to do the right thing, and we need to dig new growth drivers. How do we see this industry? Mengniu will make adult milk powder bigger and stronger and also infant formula milk as well. For adult milk powder, our share is around 54%. For adult powder, will there be big room for growth in the future? There are two points here. First, if you look at mass consumer goods segment, there is still big room. Now, our growth is mainly in 10 provinces, but in the future, we need to cover the whole country. There is still a lot of room for us to dig deeper into. This year, we launched the high-end functional, Yourui brand. In the second half of the year, we're going to make some moves, and we believe that in the high-end functional middle-aged and elderly milk powder, it is going to achieve good results. We are talking about mass nutrition, and we are going to have whole country coverage and also refined management of channels. We have launched this high-end, middle-aged, and elderly milk powder brand. With all these, we believe that adult milk powder can see quite good growth. That's my answer. Thank you. Mr. Yan, can I follow up? For infant formula milk, do you have some measures to enhance your market share? Yes. Just now I talked about adult powder. Let me turn to infant milk formula. This year we did rebranding. In the period to come, we have to reinforce our foundation and do a good job with our brands and products. For channel operation, we will be more focused. In some regions and channels, we can build our advantage so that we can enjoy stable growth. Thank you. Mr. Lu, Mr. Gao, and Mr. Yan for your sharing. That's all my questions. Thank you. We now welcome Tony Huang from Goldman Sachs. Thank you. Mr. Lu and Mr. Zhang, this is Lincoln from Goldman Sachs. I have three questions. The first question I would like to follow up with respect to milk price and margin. We know that first half this year, its increase is over 15%. For second half of the year, what is the outlook? For next year in terms of milk price, and do you think that it will continue to be high and continue to go even further? What is your judgment? With this in mind, I would also like to ask for the second half of the year of the growth margin, what is your outlook? As we can see that for 2019, first half and second half, and actually, in terms of the margin, there is quite a big difference. For first half of this year, with the milk price at such a high price, you were able to keep the margin stable. Looking further into the future, do you think that we would be able to see very good recovery and improvement of the margin? In terms of the margin going forward, if the room for improvement really will come from the decrease of the expenses, how much room is there to further decrease in terms of expenses? This is my first question. Second, I'd like to ask about the Bellamy's. I can see that for first half of the year for Bellamy's, its revenue, we have seen it slow down. In terms of its profit, we can also see some losses. What are the reasons for the losses? If we look into the second half of the year, if this part of the business can recover. In terms of the overall profit margin, what should we expect? In addition, for Yashili at the moment, its profit margin going forward, is there any possibility of that improving? Thirdly, I'd like to ask about fresh milk. Fresh milk business at the moment, we can see that it is still at a very fast speed. Can you please let us know about the margin for this business and your high-end fresh milk going forward? At what time point we would be able to see very meaningful profit contribution? Thank you. Thanks. Well, I'll have Mr. Zhang answer your question. Thank you. Hi there. With respect to raw milk price, looking at 2020, first half of last year, it's relatively low since the pandemic outbreak. In the market, we have seen changes in the market. Starting from second half of last year, the raw milk prices started ticking up. You're asking about 2021, first half of this year. Yes, indeed, compared with the same period last year, there is a quite faster growth. So far, from June, July until now, the milk price increase has already been at quite a certain level. Compared with the same period last year, the increase of the second half of the year will definitely not be as high as the increase percentage of the first half of the year because the base figure is already very high. For Q3, this is a peak season for consuming raw milk. Looking at history, traditionally for Q3, we will see some increasing of raw milk price in Q3. Overall speaking, for second half of this year, the overall milk price, there will be some increase. The increased portion will slow down because it's already at quite a high level. This is our milk price. Second, moving on. With this milk price expectation in mind and for the second half of the year, in terms of the overall profit for the company, what are we looking at? With the milk price increase, we can see that for first half of the year, it has impacted the gross profit and actually has quite a big impact. Even as for the first half of this year, compared with 2019, it has only decreased by 0.8%, the impact from milk price is quite large. We had used other methods such as reducing expenses and improving efficiency, et cetera, to offset that impact. For the second half of the year, in terms of a gross margin, looking at the past years and because of product structure, the second half of this year compared with the first half of this year, it will decrease. The overall situation, hearing from Mr. Wu, for beginning of the year, it is less than 12% in our OP margin, and the continuous development will be there to continue to stay. Therefore, for the second half of the year and the improvement will not be 50 basis points, but the continuous improvement trajectory will not change. In other words, it will not be lower than the OP margin of 2019. Thirdly, Bellamy's, I'll also briefly touch on this. With respect to Bellamy's, yes, indeed, this year for overall the industry, especially for the imported products because of the impact from the Daigou business, for Bellamy's last year, it was at a very high base. Therefore, first half of this year, there is a decline, this is in line with the industry. Therefore, this shows there's business loss for first half of this year. Second half of this year, there will be growth. The two reasons, first of all, for our imported business, compared with the first half of the year, it is recovering. Last year's second half, it is at a low base. Therefore, compared with same period last year, there will be some growth. Looking at the current situation, Bellamy's for the whole year, in terms of the result of the profit, I don't really think that it's going to be profitable. This loss for Mengniu, overall speaking, for the group, it is not very big because its base is very small. This is the general situation. Perhaps for fresh milk, I'll kick off first, and others could add. As Lu Minfang said, fresh milk, it has maintained over 120% growth, very good growth. To first half of this year, we're seeing that it's still making a small loss because for the early stage, and we can see that for the first half of the year, there's still some loss, and it is possible that we can expect it to be becoming profitable this year. You can see looking at some of our high-end products, for instance, the fresh milk Shiny Meadow business and its percentage is accounting for 40% of the fresh milk business. Going forward, we believe that this is a sector that we can definitely make it to become profitable in the future. This is what I have to say. I'm not sure if I have answered all your questions. You have given a lot of questions in one go. Okay, great. Thank you, Mr. Zhang. Our understanding could be that for the whole year, the profit margin will be better than 2019, and its main improvement will mainly come from second half of the year, right? Because first half of the year is relatively stable. Yes, that's right. That's the correct understanding. For the second half of the year, in terms of our SG&A, and generally speaking, it is lower in the second half of the year. We will continue to improve our S&D efficiency. Secondly, we talked about the raw milk price. The impact will not be as big as the first half of this year if we're comparing to the same period last year. Okay, great. Thank you, Mr. Zhang. Next question from CICC, Chen Wenbo. Greetings, Management. I have three questions. First, about competition in the industry, what do you think? This year, with high milk price, competition in the market is quite healthy. Next year, milk price may only increase slightly or may not increase, and then in the year after next year, milk price may fall. Do you think there will be change in the competitive landscape next year and the year after next year? If there is not big increase in milk price, then will the market go back to the situation when raw milk price is not that high? If there is a change, then what would be the difference with previous competitive landscape? Another question is, if we do not include fluctuation in raw or raw material price, then by means of product portfolio enhancement every year, how many points of growth do you think will be seen in GP margin? Now, there is four points decline in terms of raw milk price increase, but then in the statement, a 0.8% change. It seems that the impact can be quite big. For the group buying channel, what is your view about that? What's your attitude? By passive selling of distributors, there is a big subsidy to promote selling, so there may be impact as a result. In the future, how are you going to cooperate or control this channel? These are my three questions. Thank you. Let me take your first question regarding product mix. Peter will answer it. For group buying, I think Gao Fei will take your question. First, regarding competition in the industry. You can see that in the overall macro situation, Mengniu had already completed our overall layout for the coming three to five years in the dairy product industry. For categories with high growth, our layout is very clear. I believe that future competition is going to be differentiated competition, and competition based on brand advantage and innovation capability, unlike in the past. At the beginning of dairy industry, basically, we relied on price and also fast sales promotions to compete. Now we have already completed our initial layout. For high-end, like Milk Deluxe and also organic milk, we have already made our layout. For Shiny Meadow, and also brands, and also cheese, adult milk powder, chilled yogurt and beverages, high-end chilled yogurt, upgrading and so on. All these have been completed according to our strategy. This kind of improvement and also advantage will be gradually realized in the competition. We have already achieved number one in Milk Deluxe high-end milk and also Shiny Meadow, number one in the high-end fresh milk within such a short period of time. With Aice and Milkground acquisition, again, we achieve number one in its corresponding category. For yogurt, in terms of high-end yogurt, we achieved rapid growth. For chilled yogurt, our market share has been greatly enhanced. If you look at our various product categories, in fact, in the first half this year, ice cream is another highlight. We have done product upgrading. Our ice cream brand is a good one. If you refer to our and all these brands, and also other high-end ice cream brands, the growth rate is fast. They contributed a lot to our overall growth. Future competition is a competition on layout, branding, and innovation. I think in China's dairy product industry, this is our strength for Mengniu. In the future, I think this is in line with future industry development. In fact, this is the result of our clear execution of our five-year plan. The next question will be answered by Mr. Zhang. Right. In the future, concerning improvement of our profitability, in the past, we have been saying that it comes from two points. Structural enhancement of big category. Number two, improvement of product mix within every category. In the past few years, we made layout in a few categories, fresh milk, fresh milk business, and also cheese and milk powder or milk formula category. The profitability is higher than liquid milk in all these categories. In the future, our OP margin improvement is actually something that we can anticipate. For new product categories in the past few years, their actual functions have not been seen yet. If you look at fresh milk this year, it will break even, and it will begin to see profitability. Its share is going to rise. Profit margin will improve. They will make a lot of contribution to our improvement in profitability in the future. For our existing businesses, I think there is room for profit improvement. In the first half this year, our chilled products business, in the past, GP margin was not high. This year, there is a lot of improvements in GP margin by means of price adjustment and product mix enhancement. For chilled yogurt products, in first half this year, we have Yoyi C and also Champion. They are high profit margin or high GP margin products. In the future, they will help to raise our OP margin. In each category, product mix continues to improve. Now for UHT, like Milk Deluxe, growth rate is the highest. It will improve our structure and profitability. For example, Champion and Yoyi C. Within each category, there is better utilization now. A lot of contribution can be made from that. In the future, our profitability can be improved. I think this is something we can anticipate. Group buying. I will answer the third question. Community platforms and group buying. I think we all know that if you look at consumption Internet and industrial Internet, that there is a shift towards industrial Internet for consumption Internet platforms. Traffic and also costs are getting higher. Competitive pressure is also getting bigger. From our point of view, community platform competition right now is unhealthy. It's not sustainable. It is a simple business model, but not a very good one. In recent years, well, the market is very chaotic, and it is a business model driven by capital. I think this is not healthy. Our attitude and our view is that we will not focus a lot on this channel. Based on our business pattern or discipline, that would be much better. However, if the market gets very chaotic and messy, then, well, we do not support it. That's our attitude. Right. Thank you. Thank you, management team. We now welcome Lina Yan from HSBC. Thank you, management team, for giving me this opportunity. I have two questions. The first question is with respect to channels. Can you please share with us for first half of this year in terms of some of the new channels, for example, O2O online or in the villages, in the direct sales points, et cetera. In terms of their percentage, what are they respectively? In terms of the profit versus the wholesale, what is the difference? Going forward, in terms of these new growth channels and to what percentage when they reach, we would be able to achieve at a healthy level? This is my first question. I'll stop here first. Well, with respect to these new channels, actually, for different business segments, it differs from each other. For UHT at the moment, for our RTM deployment, for various deployment, it is quite healthy at the moment, especially for our building through connecting the online and the offline and as well as our whole network fulfillment push forward. Overall speaking, our percentage is increasing. If we add the traditional e-commerce as well as the new online business, and the percentage should already be over 10%. This is one of the very important steps of the reforms of our RTM. Second, with respect to some of the very new channels, for example, such as fresh food milk business and channels, and actually for our fresh milk as well as our cheese business, there's a lot of push forward faster. For our fresh milk delivery to door business at the moment, they already account for 20%, and especially the higher-end ones. The higher-end it is, and the higher the percentage it is. In this regard, our Deployment is going very well, and going forward, this will replace the traditional method. In the meantime, for our yogurt and ice cream, which is the fresh delivery to door services, we have seen very fast growth. Generally speaking, it would be those two. One is for the RTM reform as well as the digitalization fulfillment, and so this is one. Second, which is fresh delivery to your doorstep. These are the ones that are pushing forward for our fresh milk and fresh chilled yogurt, as well as ice cream business. It has pushed the development of these, and their% is also increasing. Second question I would like to ask with respect to our understanding of the gross margin. If we look at the first half of the year, it will be -4% of the milk price, because of the product upgrading, there is an impact of 80 basis points. Let's assume that the raw milk price did not change, do you think that the upgrading of the product will be fully reflected in the product's profit, and therefore for second half of this year, the impact on the profit margin will be weakened from the raw milk price, and therefore, in the second half of the year, we'll be able to see more unleash of the benefits of the product upgrading reflected in the profit margin improvement? Is there a positive correlation between those two? Basically, for the high-end product, is it that the upgrade will pick up its speed? I don't know whether you can share with us on this point. Well, I'll ask Mr. Zhang to answer this question. Well, actually, I have a different view from what you have just said. In terms of the upgrading of the product versus the raw milk price, there's no correlation between those two. This is about consumption, if we look at first half of the year, the growth of Milk Deluxe, it is going very well, this is not because of the increase of raw milk price, it's because we continue to look for the insights of the consumers and continue to launch products that meet their needs. For instance, for first half of the year, we launched a product called Desert Organic, it has been very popular among the consumers. Therefore, for our product upgrading, it is achieved through innovation. Of course, for milk price, when it comes down, we'll continue to change our product structure. Okay, thank you. That is for the raw milk price, its pressure when it decreases, and therefore, we will see a very obvious of the profit improvement, especially in the second half of this year, right? Yes, that's correct. Thank you. Next question, Wu Hongwei from Haitong Securities. Thank you, Mr. Lu. Thank you, management. First of all, I would like to thank the Mengniu team for sharing such good interim results. I would like to thank you for your answer, because from your answers, we can feel the confidence of your company in your long-term development. Some time ago, when we communicated among institutional investors, actually, there's a lack of long-term confidence in dairy product industry, where it is not only about short-term results. Let me ask a few questions. Concerning this round of high point in raw milk price, when did it begin? There are two enterprises with profit margin higher than the midstream manufacturing industry. This is not commonly seen. Does this mean that in the future, product pricing will be inclined towards the midstream manufacturing industry level? For dairy products before pandemic, there is around 4%-5% annualized growth in consumption. Pandemic, when the most serious point of the pandemic is over, we can see a faster growth in consumption, about 7%-8%. This is quite rarely seen. In the process, there are unfavorable factors about the pandemic and the economy, still, there is such good demand for dairy products. From medium to long term after the pandemic, do you think growth rate in this industry will be maintained at this present level or it will go back to the previous 4%-5% level? Which is more reasonable? The next question is also of interest to many, that is about market competition. In the past few years, all along when Mengniu communicates with the capital market every year, the guidance of increase in net profit is being given, and every time, it comes true. This time, for the first time, concerning future years' profitability, you gave a quite clear guidance. Of course, we hope that profitability can improve and at the same time there are new businesses, there are new high growth businesses and you are going to make more investment into them. Your two companies have high market share and then for UHT business, there are stable growth. Can we see a longer-term profitability improvement? Thank you. Let me try to answer your questions. First, about milk price. High milk price has already started or appeared. This is for sure, in 2019, in 2020 and 2021, in terms of large-scale layout of supply, there would be large-scale milk source supply coming into the market. In the future, there will be a balance between supply and demand. When feedstock cost improves, I think there is room for improvement in milk price. That is your first question. For the animal rearing industry, well, it should not be viewed by means of EBITDA because it is heavy-asset and its cycles, and also long-term profitability should be lower than processing industry. If you look at a 10-year horizon, that is the trend. That is your first question. Second question. Growth rate for dairy products, 7%-8% right now. I think there are double driving forces. One. Consumption. I think 4%-5% growth in consumption is foreseeable. Number two, in the coming four to five years for dairy products, consumption structure will see big change. The process from drinking milk to eating milk will exist, will appear. With these two factors together, I think, the growth rate will be higher than the 4%-5%, the pre-pandemic level. Would it be 7%-8% or 9%-10%? It all depends on our category innovation and product innovation capability. That's your second question. Third question, market competition. I believe that market competition is moving towards a more refined competition. That is about capability building. Earlier on, I talked about brand R&D and innovation investment, digital capability building. I think this capability building will raise market competition to a more virtuous level. I think we have already tasted some sweetness of that in our investments. When it comes to our recent investment, in only three and a half years, we were able to achieve profitability. Of course, this was unimaginable before that. For our UHT business, we are doing digitalization with such high growth as the backdrop. Profitability still continues to see room for improvement. In the future, I believe that market competition will not be based on price strategy. I think in terms of brand innovation, digital operation capabilities, well, the growth will come from the improvements of all these. Okay? Thank you, Mr. Lu. We do agree to your judgment. Thank you. Thank you. We now welcome the last question. We welcome Mark Yan from UBS. Mr. Lu, good morning, and management team, good morning. Thank you for giving me the opportunity. I have three questions. The first one with respect to CapEx for first half of this year is CNY 2.5 billion on manufacturing equipment. For the past two years, we have seen that it is around CNY 4 billion-CNY 5 billion, and we have seen that for the past few years, and that is about tens of billion. We can also see that going forward, there will be further CapEx investment. Compared with your competitors in terms of the difference between your CapEx, will this affect your business going forward in terms of the profit, et cetera? Second question, recently, we can see that company has completed acquisition in Milkground. Our understanding is that cheese stick is one of Milkground's major growth points. What is your view on the further room for growth in this regard? In addition, we can see the competition is becoming more fierce in this segment. What is your view on Milkground's advantage in this regard? Thirdly, we have heard that there is a new Mengniu five-year strategy. We have heard from the management team at the moment, your deployment is quite complete. Going forward in order to realize this target, will you continue to carry out further acquisition? Thank you. My first question, perhaps I'll have Peter to answer. I'll answer the latter two. With respect to CapEx, you can see that for CapEx for the 1st half of this year, we have CNY 2.57 billion, which is quite a big increase compared to last year, CNY 1.2 billion. Actually for 2021, for the whole year, compared with the last 2 years, it's quite a big increase. This is mainly based on our sales demand as well as a few deployments of new factories in the meantime, based on different product categories, and we will also add some production lines. Our overall plan is based on the future business, and this is definitely in line with the future business. With respect to what you have said, comparing with our competitors, I don't really know what their plan is and what they intend to do. I cannot really comment on that. However, with respect to our own production capability building as well as our own capability improvement, and we will be using it to guide our next 3 years' development plan. For these 2 years, this will be a peak of our CapEx. In the past year, we can see that all our factories are already at full capacity. We therefore need to expand our capacity, and add new production lines. With respect to Milkground and Milkground in their interim results announcement, I believe that we have already communicated with Ms. Chai. First of all, we are very bullish, confident in the cheese sector. Today, for the children's cheese stick, and there are already a lot of competitors in this market, but I believe that at the moment, the current existing consumption is still at a low percentage, and there's still a lot of room to grow. Secondly, Milkground has already solidified their position in the cheese stick sector, and basically for the cheese stick in the overall cheese sector, and it is definitely the leading position. In this regard, it is something that is worth looking forward to. They continue to innovate. For cheese, we are very bullish and confident. Thirdly, in terms of our overall deployment, and generally speaking, for our next five-Year Plan, we have already laid it out, and I don't think that there will be any major M&A with our current existing business. There is still a lot of room for further growth, and this is generally the situation. Okay, great. Thank you, Mr. Lu. Okay, due to time constraint, our result announcement concludes here today. I would like to thank everyone for your attention and support for Mengniu and Yashili. If you have any follow-up questions, please feel free to get in touch with Mengniu and Yashili's IR department. Thank you very much. Goodbye.