2026-01-12 02:27Summary 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.