Mengniu And Yili Case Study

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1. Introduction
This report is aimed at comparing and contrasting two dairy corporates in China, Mengniu and Yili. The dominant products of these two enterprises are similar including liquid milk, yoghourt, ice-cream and milk powder (Yili & Mengniu, 2016). Furthermore, both companies have established factories in New Zealand in order to increase the quality of their dairy products (Yili & Mengniu, 2016). Moreover, in 2009, Mengniu and Yili ranked at the world top-20 dairy producers simultaneously (Cao, 2010). As two main rivals in Chinese dairy market, Mengniu and Yili had competed for the No.1 liquid milk producer in China from 2004 (Jiang, 2004). Due to the parity of their flagship products and development, it is not easy for public to estimate
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In regard to total asset turnover, there has 0.5 difference in the figure of Mengniu and Yili. Total asset turnover equals to sales divided by total assets, thus, this figures will be analyzed from two factors, sales and total assets. According to balance sheets of Mengniu and Yili, their sales are 53,779.339 million and 60,312.010 million, respectively. There are about 7,000 million differences between sales of two dairy companies. Besides, Mengniu has one billion total assets more than Yili’s, which is concentrated in goodwill and intangible assets. The lower sales and higher total assets lead to Menniu’s lower total asset turnover which implies Yili is better at utilizing assets. Meanwhile, on the basis of industry ratio, Yili’s total asset turnover also presents a great condition, which higher the upper quartile …show more content…
This report uses Mengniu and Yili’s recent annual financial statements to find their balance sheets and income statements and calculate the relevant financial ratios. This report discusses and compares four kinds of ratios of these two companies with dairy industry ratios. Yili and Mengniu both have more liquidity than the industry. Furthermore, because Mengniu sold a huge bulk of milk powder on discount, the inventory of Mengniu decreased rapidly so that Mengniu’s inventory turnover is larger than Yili. Moreover, Mengniu borrowed huge amount money from lenders to make up for Yashili’s goodwill impairment charge and China Modern Dairy Holding Ltd.’s expected losses. It means Mengniu has a high liability and negative profits. Compared with Mengniu, Yili has better long-term solvency, higher profitability and fewer risks. Therefore, this report suggests that it is better to invest in Yili than in Mengniu because of the steady development of

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