Bright Dairy's Acquisition of Xiaoxiniu: Analysis of Unmet Performance Commitments and Goodwill Impairment Risks

Based on the collected information, I will provide investors with a detailed analysis of the unmet performance commitments and goodwill impairment risks associated with Bright Dairy’s acquisition of Xiaoxiniu.

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Bright Dairy acquired 60% equity interest in

for in , with strict performance wagering clauses stipulated in the agreement[1][2]. According to the agreement, Xiaoxiniu’s founding shareholders committed that the non-recurring profit and loss adjusted net profit for 2022-2024 would reach the following respectively:

Year	Committed Non-Recurring Profit and Loss Adjusted Net Profit	Actual Achievement	Completion Rate
2022	RMB 84.56 million	RMB 87.1852 million	103.10%
2023	RMB 95.97 million	RMB 79.2328 million	82.56%
2024	RMB 108.93 million	RMB 103.7203 million	95.22%
Total	RMB 289.46 million	RMB 270.1383 million	93.32%

The cumulative completion rate of the three-year performance commitment was only

, failing to meet the expected target[3].

In

, Bright Dairy acquired the remaining 40% equity interest in Xiaoxiniu for , with a total investment exceeding RMB 1.1 billion to achieve 100% ownership[4]. According to the agreement, the performance compensation amount of approximately will be used to offset part of the acquisition consideration, with actual cash payment of approximately RMB 470 million.

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According to Bright Dairy’s 2024 annual report, the goodwill formed from the Xiaoxiniu acquisition was

(RMB 298,793,415), accounting for a considerable proportion of the company’s total goodwill[5][6].

Asset Group	Original Goodwill Value	Accumulated Impairment Provision
Xiaoxiniu Group	RMB 299 million	Need Attention
Synlait Cheese Division	RMB 262 million	RMB 76 million
Synlait Milk Powder Division	RMB 214 million	RMB 76 million
Others	Approximately RMB 110 million	Partially Accrued

Bright Dairy’s 2024 goodwill impairment test results show[5]:

• Recoverable Amount Calculation Method
  : Discounted Cash Flow (DCF) Method

• Key Assumptions
  :
  • Forecast Period Growth Rate: 3.04%-8.75% (Liquid Milk)
  • Stable Period Growth Rate: 2%
  • Gross Profit Margin: 20.6%-30.31%
  • Pre-Tax Discount Rate: 13.22%

• Recoverable Amount Range
  :
  • Liquid Milk: RMB 244 million - RMB 1.245 billion
  • Other Dairy Products: RMB 3.888 billion

Year	Performance Completion Rate	Impact on Goodwill Impairment
2023	82.56%	Impairment indicators exist, requiring testing
2024	95.22%	Completion rate improved but continuous monitoring is still needed

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From January to August 2025, Xiaoxiniu achieved operating revenue of

, a year-on-year decrease of ; net profit was only , a sharp year-on-year decrease of [7]. This trend indicates that the performance has not stabilized and there is a risk of further deterioration.

• National Liquid Milk Market Sales Volume Growth Rate:
  -7.8%
• Sales Revenue Growth Rate:
  -8.6%
• Persistent overcapacity problem in the industry
• Downward pressure on raw milk prices

Indicator	2022	2023	2024
Operating Revenue	RMB 29.206 billion	RMB 27.419 billion	RMB 24.278 billion
Year-on-Year Decline	-3.39%	-6.13%	-8.33%

In Q3 2025, the company recorded a single-quarter loss of

, with a net profit margin of only [4].

Despite unmet performance targets, Xiaoxiniu’s overall valuation increased from

in 2021 to , a growth of approximately 22.5%[4]. The PE multiple of this acquisition is approximately , which is lower than the comparable company average of , but still higher than the (calculated based on 60% equity interest) in the initial acquisition.

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• Founding shareholders are required to pay
  RMB 32.4257 million
  in compensation
• This amount will be used to offset part of the acquisition consideration to simplify the process
• Founding shareholders have pledged 40% of the equity interest to Bright Dairy[8]

• Optimize the layout of northwest raw milk sources, production capacity and market
• Utilize Xiaoxiniu’s surplus production capacity and reserved expansion land
• Achieve synergy with Ningxia animal husbandry resources
• Expand markets in East China and South China through Bright Dairy’s distribution channels

• The Shanghai Stock Exchange issued a regulatory letter regarding the rationality of the acquisition
• Bright Dairy has provided a detailed response on the transaction necessity and valuation rationality[8]

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• Unmet Performance Commitments
  : The three-year cumulative completion rate is 93.32%, triggering performance compensation clauses
• Declining Profitability
  : Performance deteriorated sharply in 2025, with a single-quarter loss in Q3
• Downward Industry Cycle
  : Persistently weak dairy product consumption demand

• Goodwill Impairment Pressure
  : If performance continues to decline, the RMB 299 million goodwill is at risk of impairment
• Uncertain Integration Synergies
  : Challenges exist in integrating regional brands with national distribution channels
• Cash Flow Pressure
  : Overseas asset Synlait has sustained losses (cumulative over RMB 750 million from 2021 to 2024), and the company sold North Island assets in 2025 to recoup funds

• Xiaoxiniu holds a market share of over
  60%
  in the Qinghai liquid milk market, with distinct regional advantages
• The acquisition PE multiple of 13.98x is lower than the industry average
• The valuation is lower than the agreed price of RMB 622 million

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Bright Dairy formed approximately

in goodwill from the acquisition of Xiaoxiniu, which faces certain impairment risks due to unmet performance commitments (cumulative completion rate of 93.32%). , which triggered impairment testing; the 2024 completion rate rebounded to 95.22%, but Xiaoxiniu’s performance deteriorated sharply again in 2025 (net profit fell 60.48% year-on-year), and the pressure of goodwill impairment still remains.

Investors should focus on the following key points:

1. Xiaoxiniu’s full-year 2025 performance and impairment test results
2. The stabilization of Bright Dairy’s overall operating performance
3. Industry prosperity trends and raw milk price movements
4. The actual implementation of integration synergies

: Medium-High Pressure — Goodwill impairment risks require continuous monitoring, but regional market advantages and valuation multiples lower than the industry average provide a certain safety margin.

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[1] Sina Finance - Announcement by Bright Dairy Co., Ltd. on Confirming Xiaoxiniu’s Performance Compensation (http://money.finance.sina.com.cn/corp/view/vCB_AllBulletinDetail.php?stockid=600597&id=11648605)

[2] Caifuhao - RMB 500 Million for 100% Ownership of Xiaoxiniu: Is Bright Dairy Breaking Through Its Dilemma or Amplifying Risks? (https://caifuhao.eastmoney.com/news/20260114112523442188890)

[3] 100est Value Network - 2024 Annual Report of Bright Dairy Co., Ltd. (https://www.100est.com/res/financial-report/r2024/SH600597_202504291664528548.pdf)

[4] Sina Finance - Why Is Bright Dairy Optimistic about Local Brand Xiaoxiniu? (https://finance.sina.com.cn/jjxw/2026-01-15/doc-inhhkmpr7648516.shtml)

[5] CNINFO - 2024 Annual Report of Bright Dairy Co., Ltd. (https://static.cninfo.com.cn/finalpage/2025-04-30/1223413933.PDF)

[6] CNINFO - Notes to the 2024 Financial Statements of Bright Food (Group) Co., Ltd. (http://static.cninfo.com.cn/finalpage/2025-04-30/1223447581.pdf)

[7] Sina Finance - Bright Dairy Responds to Shanghai Stock Exchange Regulatory Letter, Explaining the Rationality of Acquiring Xiaoxiniu’s Minority Equity (https://finance.sina.com.cn/stock/aigc/weigui/2026-01-09/doc-inhftipm5769106.shtml)

[8] East Money - Announcement by Bright Dairy Co., Ltd. on Acquiring 40% Equity Interest in Xiaoxiniu (https://stockmc.xueqiu.com/202511/600597_20251129_CFBM.pdf)