MENGNIU DAIRY(HK:02319)2024-04-01 16:00Investment Rating - The report maintains a "Buy" rating for Mengniu Dairy (2319.HK) with a target price of HKD 21.1, representing a potential upside of 23.5% from the current price of HKD 17.1 [6][15]. Core Insights - Mengniu's revenue growth faces challenges due to industry demand slowdown, oversupply of raw milk, and intensified competition. Recent management changes may lead to short-term market sentiment fluctuations, but the company's strong product development and innovation capabilities in the liquid milk sector support long-term growth potential [5][6]. - The forecast predicts a compound annual growth rate (CAGR) of approximately 14% for the net profit attributable to shareholders from 2023 to 2026, driven by continuous margin expansion [5]. Financial Performance Summary - Revenue Forecast: - 2022: RMB 92,593 million - 2023: RMB 98,624 million (YoY growth of 6.5%) - 2024: RMB 100,836 million (YoY growth of 2.2%) - 2025: RMB 105,095 million (YoY growth of 4.2%) - 2026: RMB 109,810 million (YoY growth of 4.5%) [10][12]. - Net Profit Forecast: - 2022: RMB 5,303 million - 2023: RMB 4,809 million (YoY decline of 9.3%) - 2024: RMB 5,467 million (YoY growth of 13.7%) - 2025: RMB 6,291 million (YoY growth of 15.1%) - 2026: RMB 7,163 million (YoY growth of 13.9%) [10][12]. - Profitability Metrics: - Gross Margin: Expected to improve from 35.3% in 2022 to 38.0% by 2026 - Operating Margin: Expected to increase from 5.9% in 2022 to 7.3% by 2026 - Return on Equity (ROE): Projected to rise from 15.1% in 2022 to 13.3% by 2026 [10][12]. Growth Drivers - Key growth areas identified for 2024 include: - Continued strong growth for the premium product "Te Long Su" - Positive expansion trends in ice cream sales overseas - Significant revenue growth for Bellamy's, with over 40% YoY increase in 2023 - Recovery in low-temperature yogurt sales after a significant decline - Fresh milk expected to contribute to revenue growth above the company average [5][10].