[ET Net News Agency, 8 February 2018] HSBC Global Research lifted its target price for
China Mengniu Diary (02319) to HK$31.5 from HK$26 on higher earnings estimates in 2019 and
higher valuation for Yashili (01230), and maintained its "buy" rating.
Despite Mengniu Dairy shares gaining 57% in 2017, outperforming the market by 20%, the
research house believes it is still a strong growth story with market share gain and
margin expansion potential.
The company recently announced that it has become the official sponsor for the 2018 FIFA
World Cup, and HSBC believes this sponsorship could help further strengthen its brand
positioning and increase its market share.
Leveraging this sponsorship deal, Mengniu will introduce more new products this year in
order to achieve higher volume growth and a better product mix, HSBC said. Some of the new
products introduced in recent months include high-end Xinyu UHT milk, Champion BB-12
yogurt, and PET bottled room temperature yogurt.
It believes one of the key priorities for Mengniu this year will be higher volume growth
from greater marketing efforts and a wider range of product offerings. HSBC projected
liquid milk revenue growth to accelerate from 6% in 2017 to 9% in 2018, and 7% in 2019.
It forecast its liquid milk gross margin to improve by 0.3ppt and 0.2ppt to 35.3% and
35.5% in 2018 and 2019, respectively. (KL)