Raising Mengniu’s FVE to HKD 13.70 on Higher Sales Growth Forecast; Shares Remain Overvalued
No-moat-rated China Mengniu Dairy, or Mengniu, posted a mixed second-half result, with 13% year-on-year growth in revenue and a CNY 1.8 billion loss at the bottom line. Sales were higher than our expectations, thanks to strong growth on its high-end UHT milk (Milk Deluxe) and yogurt product (Just Yoghurt). In contrast, bottom line came below our forecast, owing to increased advertising and promotion expenses (selling expense ratio increased 3.2 percentage points) and an impairment loss of CNY 2....China Mengniu Dairy is an investment holding company. Through its subsidiaries, Co. is engaged in the manufacturing and distribution of dairy products including liquid milk products (such as ultra-high temperature (UHT) milk, milk beverages and yogurt), ice cream, milk formula and other products (such as cheese) in China. Co.'s core brand is MENGNIU. Co.'s segments include liquid milk products, which manufactures and distributes UHT milk, milk beverages and yogurt; ice cream products, which manufactures and distributes ice cream; milk powder, which manufactures and distributes milk powder; and other products, which includes Co.'s cheese, plant-based nutrition product and trading business.
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