[ET Net News Agency, 16 October 2017] Daiwa Research raised its target price for China
Modern Dairy (CMD)(01117) to HK$1.85 from HK$1.32, and upgraded its rating to "outperform"
from "underperform".
The research house now expects CMD's operating margin to start to recover from 2H, and
continue improving in 2018, thanks to the steady rise in raw-milk prices in China and
worldwide since 3Q.
Daiwa said CMD's earnings are highly correlated to raw-milk price changes, but the
research house sees more upside than downside risk for CMD's raw-milk ASPs, as further
cooperation with China Mengniu Dairy (02319) should protect both its sales volume and ASP
downside and enhance its cost efficiency.
Daiwa raised its 2018-19 revenue forecasts by 2-4% due mainly to its higher raw-milk
price assumptions. With its lower selling-cost and feed-cost assumptions, Daiwa forecast
CMD to post cash earnings of CNY442-1.1m for 2017-19 (versus loss-making before). Hence,
it revised up its 2017-19 EPS and expects CMD to turn profitable in 2018. (KL)
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01117 CH MODERN D
Nominal 
0.640 +0.020 (+3.226%) Others
16/10/2017 11:28
[I-bank focus]Daiwa upgrades China Modern Dairy to HK$1.85
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