Daiwa lowered its target price for China Mengniu Dairy (02319) to HK$31.4 from HK$31.8 and downgraded its rating to "outperform" from "buy".
The research house revises down the 2020-22E revenue for Mengniu on concerns about further market-share losses in the infant formula (IMF) market. It also cuts the 2020-22E EPS by 5-9% due to the increasing investment required for fresh milk operations, higher input costs, higher net financial costs and costs at the overseas operations (mainly associates in Australia) due to CNY depreciation.
Daiwa expects revenue from Yashili, Mengniu's IMF subsidiary, to come under pressure in 2020 on market-share losses to other leading domestic brands.
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