[ET Net News Agency, 15 March 2018] Goldman Sachs lowered its target price for China
Mengniu Dairy (02319) by 5% to HK$27.9, and downgraded its rating to "neutral" from "buy"
with limited upside and near-term earnings risk.
The research house sees earnings risks in the near term as it prioritizes sales growth
over profit margins in order to expand its scale both in China and overseas. Hence it cut
its 2017-19 EPS forecasts by 2-6% reflecting the faster liquid milk sales growth but
offset by higher selling expenses.
Goldman continues to expect consolidation in the dairy market and Mengniu to gain share
from new product offerings and its strong distribution network. It expects Mengniu to
achieve 12% sales CAGR for 2017-19. However, it believes the market has largely priced in
its sales growth and margin recovery trend in 2018, while there is near-term earnings risk
as the company is prioritizing sales growth over margins this year. (KL)