[ET Net News Agency, 3 September 2018] HSBC Global Research lowered its target price
for China Mengniu Dairy (02319) to HK$29.1 from HK$31.5 on updated estimates and revised
target prices for Yashili International (01230) and China Modern Dairy (01117), and
maintained its "buy" rating.
The research house said sales grew 17% in 1H. By category, milk formula was the biggest
driver, with 65% y-o-y growth, driven by Yashili, which registered 56% growth. Thanks to
product mix improvement and well-controlled sourcing costs, Mengniu's gross margin
expanded by 3.6ppt.
HSBC looks for Mengniu's sales to be up 16% in 2018 versus management's guidance of
mid-teens growth. This is followed by another 10% growth in 2019.
While it lifted its revenue forecast by 1%, HSBC cut its 2018-19 net profit by 7-8%.
This is mainly to reflect higher investments in the brands and channels. It now foresees
reported EBIT margins at 5.8% in 2018, and 6.6% in 2019, from 4.6% in 2017. (KL)