Daiwa Research raised its target price for China Mengniu Dairy (02319) to HK$26 from HK$20, and upgraded its rating to "buy" from "outperform" on improving supply/demand dynamics in global dairy markets and consolidation of the downstream market in China.
The research house raised its 2017-19 revenue estimates by 1-4% on higher ASP assumptions due to Mengniu's robust sales performance and continuous market share expansion.
As Mengniu upgrades its product mix to focus on high gross margin products, Daiwa believes Mengniu's gross margin (+3.2pp/0.4pp over 2017-18) will beat the street's estimates.
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