Daiwa Research lowered its target price for Ausnutria Dairy (01717) to HK$17 from HK$18 and maintained its "buy" rating.
The research house met Ausnutria's management for an update in Beijing and visited a few supermarkets there on 16 October. Its key takeaways were: (1) management expects 2H 2019 cow infant-milk formula revenue growth to reaccelerate having obtained licences for some cow infant milk formulas in 2Q, and (2) Ausnutria plans to maintain the same price for offline versus online channels to protect offline distributors' interests.
Management expects brand infant milk formula revenue to rise by over 30% for 3Q on market-share gains, particularly in the premium segment. Daiwa estimated its non-cash loss due to a derivatives revaluation in 1H (CNY174m) reversed to a slight gain in 3Q as the
share price corrected. It also looks for 40% net-profit growth in 3Q (ex-non-cash items) and continuous share repurchases.
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