Summary of Mengniu Dairy Corporate Day Conference Call Company Overview - **Company**: Mengniu Dairy (2319.HK) - **Industry**: Consumer & Leisure, specifically dairy products Key Takeaways 1. **Sales Guidance for FY25**: - Management reiterated a sales decline guidance of mid-single digits to high-single digits (MSD%-HSD%) for FY25, with expectations of a similar decline in the second half of FY25 [1] - Despite challenges, the company aims for a flat operating profit margin (OPM) year-over-year in 2025, although there are potential pressures from liquid milk pricing adjustments and channel investments [1] 2. **Segment Performance**: - **UHT Milk**: Demand remains soft, with greater pressure on basic milk compared to deluxe milk in the second half of FY25 [1] - **Chilled Fresh Milk**: Expected to achieve double-digit percentage (DD%) sales growth for FY25 and FY26, driven by brand investment and channel expansion [1] - **Chilled Yogurt**: Anticipated slight positive sales growth in FY25, supported by health trends and new initiatives like customized products with Sam's Club [1] - **Cheese and Milk Powder**: Management is optimistic about achieving DD% sales growth in cheese and solid OPM improvement in milk powder for FY25 [1] 3. **Industry Outlook**: - Overall demand in the dairy industry remains weak, with a projected 7-8% volume decline in liquid milk for 2025 [1] - Mengniu Dairy is expected to underperform the industry due to delayed pricing adjustments in response to declining raw milk prices [1] 4. **Financial Adjustments**: - The company anticipates a significant reduction in dry powder impairment losses by 40-50% compared to 2024, with a narrowed volume in dry powder expected in the second half of FY25 [1] - There are ongoing impairments related to the herd size cut at Modern Dairy for FY25 [1] 5. **Shareholder Returns**: - Mengniu Dairy plans to maintain its dividend per share (DPS) and total dividend in 2025 compared to 2024, with a total dividend payout expected to gradually increase [1] - The company will continue its share buy-back program, which will be larger in scale compared to the previous round in 2024 [1] Additional Insights - **Valuation and Price Target**: - Goldman Sachs has a Buy rating on Mengniu Dairy with a 12-month price target of HK$20.50, representing a potential upside of 36.9% from the current price of HK$14.97 [7] - The valuation is based on a 2026E P/E of 15.1x, which is one standard deviation below the prior downcycle P/E in 2015-16 [6] - **Risks**: - Key downside risks include slower-than-expected premium demand, a slower recovery in dairy demand, increased competition in the dairy industry, and wider losses in new product categories [6] This summary encapsulates the critical points discussed during the Mengniu Dairy Corporate Day, highlighting the company's performance expectations, industry challenges, and strategic initiatives for shareholder returns.

Summary of Yili Industrial (600887.SS) Corporate Day Company Overview - **Company**: Yili Industrial - **Industry**: Consumer & Leisure (Dairy Sector) Key Takeaways from the Corporate Day 1. **2025 Performance and Guidance**: - Management maintains guidance for positive sales growth and above 9% net profit margin (NPM) in 2025 - Growth driven by solid performance in non-UHT milk products and resilient UHT milk performance - UHT milk achieved stabilized market share; chilled liquid milk recorded positive growth in 9M25 - Cheese, milk powder, and ice cream delivered strong performance with double-digit percentage (DD%) sales growth in 9M25, expected to maintain for FY25 - Emerging channels (E-commerce, membership KAs, discounter stores, community stores) account for approximately 30% of UHT milk channel mix, while traditional supermarkets declined to 20% [1][1][1] 2. **2026 Outlook**: - Management expects improvement in raw milk supply/demand dynamics with herd cuts and stabilization of raw milk prices - Aims to outgrow the industry with positive sales growth in liquid milk in 2026, leveraging the Lunar New Year (LNY) season for growth through integrated marketing activities - Continued collaboration with emerging channels is planned - Confidence in cheese, milk powder, and adult nutrition products for 2026 [1][1][1] 3. **Infant Milk Formula (IMF) Strategy**: - Targeting double-digit percentage sales growth in milk powder - Aims to achieve No. 1 market share for Pro-kido by 2027, already holding No. 1 market share for Pro-kido + Ausnutria in 2025 - Anticipates a slight decline in new births in 2025 compared to 2024, but expects a slight increase in 2026 due to the Year of Horse in China [1][1][1] 4. **Long-term Growth Pillars**: - Cheese and dairy deep-processing identified as emerging long-term growth pillars - EU anti-dumping measures favoring domestic leaders in the Chinese dairy industry - Upgrades in adult nutrition and overseas business expected to drive incremental growth with potential double-digit percentage sales growth in 2026 [1][1][1] Financial Projections - **12-month Price Target**: Rmb33.90 - **Current Price**: Rmb27.68 - **Market Cap**: Rmb177.1 billion / $25.4 billion - **Revenue Projections**: - 2025: Rmb116.75 billion - 2026: Rmb119.00 billion - 2027: Rmb122.01 billion - **EBITDA Projections**: - 2025: Rmb16.10 billion - 2026: Rmb17.25 billion - 2027: Rmb18.55 billion - **EPS Projections**: - 2025: Rmb1.70 - 2026: Rmb1.79 - 2027: Rmb1.98 - **P/E Ratios**: - 2025: 16.3x - 2026: 15.5x - 2027: 14.0x - **Dividend Yield**: Expected to increase from 4.5% in 2025 to 5.4% in 2027 [7][7][7] Risks and Methodology - **Key Risks**: - Slower-than-expected demand for liquid milk premium products - Slower recovery in dairy demand - Increased competition [6][6][6] This summary encapsulates the essential insights from Yili Industrial's corporate day, highlighting the company's performance, strategic outlook, and financial projections.

Summary of Mengniu Dairy Corporate Day Company Overview - **Company**: Mengniu Dairy (2319.HK) - **Industry**: Consumer & Leisure, specifically dairy products Key Takeaways Recent Trends - **UHT Milk Demand**: The company reported continued weakness in year-to-date (YTD) demand for UHT liquid milk, with April and May trends mirroring the first quarter of 2025 without significant improvement in consumer sentiment [1] - **Growth in Other Categories**: There is healthy growth in fresh milk, chilled yogurt, milk powder, and cheese, while UHT milk remains below targets due to declining raw milk prices and distribution challenges, particularly in supermarkets [1] Strategic Initiatives - **Pricing Flexibility**: Mengniu is adopting a more flexible pricing strategy for UHT milk, benefiting from a high single-digit to double-digit percentage year-over-year decline in raw milk prices in 2025 YTD [1] - **Channel Expansion**: The company is increasing collaboration with emerging channels such as snack discounters, Sam's Club, and coffee/bubble tea shops, including adding Starbucks to its clientele [1] - **Volume and Operating Leverage**: Efforts are being made to enhance volume and operating leverage through these new channel partnerships [1] Margin Outlook - **Gross Profit Margin (GPM)**: Management anticipates a more certain GPM expansion for liquid milk due to ongoing raw milk cost benefits and a resilient product mix within UHT milk, although this may be partially offset by lower margins from expanding two-business segments and ASP dilution from discounts [1] - **Operating Profit Margin (OPM)**: The company aims to maintain a stable OPM target in 2025, with potential improvements in the first half of 2025 due to an easier year-over-year comparison [1] Capital Expenditure and Shareholder Returns - **Capex Expectations**: Mengniu expects capital expenditures to exceed RMB 3 billion in 2025 for maintenance and investments in value-added further processed dairy products [1] - **Dividend Policy**: The company is committed to maintaining stable or higher dividends per share year-over-year [6] Financial Projections - **Revenue Forecast**: Projected revenues for 2025 are RMB 89.9 billion, with an expected EBITDA of RMB 9.998 billion [8] - **Earnings Per Share (EPS)**: EPS is forecasted to be RMB 1.30 in 2025, with a price target of HK$23.00, indicating a potential upside of 26.5% from the current price of HK$18.18 [8] Risks - **Key Risks Identified**: 1. Slower-than-expected premium demand 2. Slower recovery in dairy demand 3. Increased competition in the dairy industry 4. Potential losses in new product categories [7] Additional Insights - **Market Position**: Mengniu Dairy is positioned within a competitive landscape, with a market cap of HK$71.5 billion and a focus on expanding its product offerings and market share [8] - **Investment Rating**: Goldman Sachs has rated Mengniu as a "Buy" with a target price based on a conservative P/E multiple [7] This summary encapsulates the critical insights from the Mengniu Dairy Corporate Day, highlighting the company's current performance, strategic initiatives, financial outlook, and associated risks.