26 March 2026 | 1:41AM HKT Equity Research Mengniu Dairy (2319.HK): FY25 First Take: Sales/Core OP in line; announces 3Y shareholder return plan; Buy Mengniu reported 2025 results on 25 Mar, with sales at Rmb82.2bn, down 7.3% yoy, in line with GSe at Rmb81.4mn and at the mid point of prelim results at Rmb81.6~82.5bn. Reported NP came at Rmb1.55bn close to the higher end of pre-results at Rmb1.4~1.6bn, under the impact of Rmb2.3bn provisions on idle capacity and certain financial assets as a matter of pruden ...

Summary of Mengniu (2319.HK) Preliminary Results Conference Call Company Overview - **Company**: Mengniu Dairy Co., Ltd. (2319.HK) - **Industry**: Dairy Industry in China Key Financial Highlights - **2025 Preliminary Results**: - Core Net Profit (NP) expected to be between Rmb3.6 billion and Rmb4.0 billion, which is 0-9% above the forecast of Rmb3.665 billion [1] - One-off and non-cash impairment provisions of Rmb2.2 billion to Rmb2.4 billion were booked, relieving future financial pressure [1][2] - Group sales declined by 7-8% YoY, aligning with forecasts [2] - Operating Profit Margin (OPM) for 2025 was reported at 7.9%-8.1%, consistent with expectations [2] Sales Performance - **Liquid Milk Sales**: - Experienced stabilization and recovery since the second half of 2025 due to improved demand and stabilized raw milk prices [1][2] - Fresh milk, milk powder, and cheese products recorded double-digit growth in 2025 [2] - **Future Sales Expectations**: - Anticipated group sales growth of approximately 5% YoY for the full year 2026, with a return to high single-digit growth in January-February 2026 [3] Operational Insights - **Impairment Provisions**: - Non-cash nature of impairment provisions means stable operating cash flow, with no significant impact on dividend payouts [2] - **Cyclical Recovery**: - Mengniu's higher exposure to liquid milk is expected to lead to a stronger cyclical profit recovery compared to industry peers in 2026 [3] Investment Outlook - **Rating**: - Maintain a Buy rating on Mengniu with a target price of HK$21.10 per share, representing a potential upside of 30.6% [4][6] - **Market Capitalization**: - Approximately HK$62.68 billion (US$8.01 billion) [4] Risks and Challenges - **Market Fragmentation**: - The dairy market in China remains highly fragmented with intense competition [7] - **Food Safety Incidents**: - Recent food safety issues pose significant investment risks for the sector [7] - **Demand Sensitivity**: - Weak demand for dairy products in a soft macroeconomic environment could impact profitability [7] - **Execution Risks**: - Risks associated with newly acquired businesses could affect overall performance [7] Conclusion - Mengniu is positioned for recovery with expected sales growth and improved profitability in 2026, despite facing several industry challenges. The company's strategic focus on liquid milk and operational adjustments are likely to enhance its competitive edge in the market.

Group 1 - The Competition Council of Lithuania approved Vilkyškių pieninė AB's acquisition of 100% shares of Marijampolės pieno konservai UAB for a transaction value of 7.5 million euros, granting Vilkyškių pieninė sole control over the company [1][2] - Following the acquisition, VILVI Group has become one of the largest milk processing groups in the Baltics, with Marijampolės pieno konservai operating two factories that produce canned milk, butter, and various types of milk powder [2][3] - Marijampolės pieno konservai UAB has generated revenues of approximately 65 million euros in recent years, with planned revenues exceeding 100 million euros annually [4] Group 2 - The main activities of Marijampolės pieno konservai UAB will remain focused on producing canned milk and milk powder, with plans for systematic integration into VILVI Group to leverage economies of scale and operational synergies [3] - As of January 16, 2026, VILVI Group comprises several companies, including Vilkyškių pieninė AB, Modest AB, Kelmės pieninė AB, Kelmės pienas UAB, Pieno logistika AB, Baltic Dairy Board SIA, and Marijampolės pieno konservai UAB, employing approximately 1,400 employees [4]