2024-04-01 16:00Investment Rating - The report maintains a "Buy" rating for Mengniu Dairy with a target price of HKD 27.2, indicating a potential upside of 62% from the current stock price [1][2][4]. Core Insights - Mengniu Dairy reported a revenue of RMB 98.6 billion in 2023, representing a year-on-year growth of 6.5%. Operating profit was RMB 6.1 billion, up 6.3%, with an operating margin improvement of 0.4 percentage points. However, net profit decreased by 5.7% to RMB 4.88 billion [1][2]. - The company has undergone a change in leadership with the appointment of Gao Fei as the new president, while the strategic goals remain unchanged. The dividend payout ratio has been increased to 40% [1][2]. - The liquid milk segment showed steady growth with revenues of RMB 82 billion, a 4.9% increase, and an operating profit margin of 7.5% [1][2]. Financial Performance Summary - Revenue and Profit Forecasts: Expected net profits for 2024, 2025, and 2026 are RMB 5.39 billion, RMB 5.9 billion, and RMB 6.31 billion, respectively, with corresponding EPS of HKD 1.47, HKD 1.61, and HKD 1.73 [1][2][8]. - Ice Cream Business: Revenue reached RMB 6.02 billion, growing by 6.6%, with a significant profit margin increase to 7.1% [1][2]. - Cheese and Milk Powder: Cheese revenue was RMB 4.35 billion, while milk powder revenue declined by 1.6% to RMB 3.8 billion, with losses narrowing in the latter segment [1][2]. Valuation Analysis - The report employs comparable company analysis and DCF methods for valuation, suggesting a target price of HKD 27.2 based on a 2024 PE of 18x and a DCF valuation indicating a fair market value of HKD 27.9 [9][12]. - The average PE for comparable companies is noted at 13.9x, reflecting the competitive advantages of Mengniu in a currently low valuation environment [9][12].