(Yicai Global) Oct. 10 -- Shares in Chinese cheese maker Milkground Food Technology surged by as much as 7.8 percent today after Inner Mongolia Mengniu Dairy said it plans to pay CNY800 million (USD112 million) to hike its holdings by 5 percent as cheese becomes the Chinese dairy giant’s focus for growth.

Milkground’s stock price [SHA:600882] was trading up 5 percent at CNY31.17 (USD4.30) as of 1.50 p.m. China time today. Earlier in the day it hit CNY32. The stock lost 12 percent in value in the last 30 trading days from Aug. 19 to Sept. 30. The first week of October was a national holiday in China.

Mengniu is hiking its stake in Milkground to 35 percent from 30 percent, the Hohhot-based company said yesterday. It will pay CNY30.92 (USD4.35) per share, slightly higher than the closing price of CNY29.68 on Sept. 30.

The firm has no plans to acquire any more shares in Shanghai-based Milkground in the next 12 months, Mengniu said.

The two parties are tightly connected. In July, Milkground acquired a 42.8 percent stake in Mengniu unit Jilin Guangze Dairy Technology through the issuance of shares. Once the restructuring is complete, Mengniu’s equity in Milkground will increase, Milkground said yesterday.

Mengniu became Milkground’s majority shareholder in December 2020 when it paid CNY3 billion (USD421.7 million) for a 23.8 percent stake. The stock hit a record high of CNY84.50 on May 25, 2021, an almost six-fold increase from 2020. But since then its share price has lost 60 percent of its value although it is still double what it was in early 2020.

Milkground logged a 18 percent leap in net profit in the first half from the same period last year to CNY132 million (USD18.5 million) while revenue surged 25.4 percent to CNY2.6 billion (USD365 million), according to its latest earnings results.

Editor: Kim Taylor