[ET Net News Agency, 30 August 2019] Citi Research raised its target price for China
Mengniu Dairy (02319) to HK$41.72 from HK$35.66 and maintained its "buy" rating.
The research house said the market has under-appreciated Mengniu's strong 1H results. It
said the top-line beat was not driven by promotion. While its underlying GPM stayed
flattish, its premiumization and supply-chain efficiency improvement fully mitigated the
pressure of raw milk costs.
The company invested hefty advertisement expenses in 1H. Citi expects the drop in the
A&P-to-sales ratio to be more significant in 2H than 1H. The JLB disposal will result in
Rmb3.4bn pre-tax gain in 2H. (KL)