SPDB International·2025-08-29 09:41Investment Rating - The report maintains a "Hold" rating for the company with a target price of HKD 17.71, representing a potential upside of 12.0% from the current price of HKD 15.84 [1][5]. Core Insights - The company's revenue and operating profit margins are under pressure, with management indicating that the second half of 2025 will remain challenging. They expect a year-on-year revenue decline in 2025 of mid to high single digits, while operating profit margins are projected to remain flat [5][12]. - The company has experienced a significant decline in liquid milk revenue, down 11.2% in the first half of 2025, which is much greater than its main competitor, Yili, which saw only a 2.1% decline. This suggests a loss of market share for the company [5][12]. - Management's cautious pricing strategy has led to a substantial drop in sales volume, and while they have reduced sales expenses by 8.4%, this may have been a strategic decision to maintain operating profit margins [5][12]. Financial Performance and Forecast - The company's revenue for 2025 is forecasted to be HKD 82.995 billion, a decrease of 6.4% year-on-year. The core net profit is expected to decline by 14.5% to HKD 3.792 billion [7][13]. - The operating profit margin for 2025 is projected to be 8.3%, slightly up from 8.2% in 2024, but the overall financial outlook remains cautious due to market conditions [12][13]. - The report highlights that the company's performance in the first half of 2025 was primarily supported by lower raw milk prices, but this benefit may diminish as prices stabilize [5][12]. Market Context - The report indicates that the industry is facing prolonged challenges, with weak demand and increased competition expected to persist in the short term. This environment is likely to keep the company's sales prices and profit margins under pressure [5][12]. - The management's guidance suggests that the company is still weighing the balance between revenue and profit margins, indicating a potential shift in focus towards maintaining market share in the second half of 2025 [5][12].