Yili's Guide for 2022 Likely Achievable; FVE Stays at CNY 46

Wide-moat Yili delivered resilient first half results that were in-line with our estimates, with double-digit growth of revenue and net profit. Robust sales growth in ice cream and share gain in milk powder more than offset flattish liquid milk sales. Yili's success in milk powder also drove faster company sales growth than peers as well as year-on-year improvement in gross and net margin levels. Management set a cautious tone for sales recovery of liquid milk in the third quarter, although it maintained the full year company sales and profit guidance set out in April. We note the pace of premiumization for liquid milk could slow in the near term, but Yili's competitive advantages versus peers, such as stronger operational efficiencies and scalable distribution network, remain unchanged.