(Yicai Global) Jan. 19 -- Raw milk supplier China Modern Dairy Holdings expects its profit to have been at least CNY700 million (USD108 million) last year, up 100 percent from the year before, thanks to a continuing rise in milk prices. The company’s shares hit a five-year high this morning on this projection.

The profit rise mainly stems from the rapid growth of raw milk production and sales, effective cost control, and an about 2 percent growth on the average raw milk sales price from the previous year, China Modern Dairy Holdings’ board of directors said in the profit forecast it released today.

Modern Dairy’s stock price [HKG:1117] was 2.82 percent down at HKD2.82 in midafternoon, giving it a HKD17.83 billion market value, after it had surged over 5 percent to HKD3 (USD0.46) at the open to a peak since June 2015.

The Covid-19 outbreak has caused Chinese consumers to attend more to their health and this has triggered a rapid growth in dairy consumption. Domestic dairy producers have also begun to vigorously develop the low-temperature fresh milk business, and this precipitated a tight supply of raw milk and corresponding milk price rises in the second half.

The average cost of raw milk in China’s main producing areas was CNY4.15 (USD0.64) per kilogram as of November, compared to CNY3.65 in 2019, according to statistics from the Ministry of Agriculture and Rural Affairs.

Milk prices are expected to gradually fall in June and July this year, since the spread between domestic and international raw milk prices is wide and consumer demand for dairy products will gradually peak, independent sector analyst Song Liang told Yicai Global.

Formed in 2005, Modern Dairy, which is based in Maanshan in eastern Anhui province, is among the biggest dairy farming and milk production companies in China. It has 26 large-scale farms nationwide. Industry giants China Mengniu Dairy and Sichuan Province-based New Hope Dairy are the firm’s top two shareholders, with respective 58.15 percent and 9.28 percent shares

Editors: Dou Shicong, Ben Armour, Xiao Yi