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China Mengniu Dairy Co Ltd 02319

Morningstar Rating
HKD 16.80 −0.28 (1.64%)
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Company Report

Mengniu Earnings: Operating Margin Expansion Is In-Line, but Net Profit Misses Expectations

Narrow-moat Mengniu reported 2023 results that trailed our expectations across revenue and net profit. Although operating margin expanded by 40 basis points year on year and was consistent with management’s guidance, net profit fell 9%, dragged down by a decline in nonoperating income. We reduced 2024-28 net profit projections by 5%-15% to account for impairment costs of raw milk in 2024 and lower nonoperating income in the next few years. Consequently, we lowered our fair value estimate to HKD 27 per share from HKD 30, which implies 19 times 2024 P/E, 11 times EV/EBITDA, and a 2.3% dividend yield.

Price vs Fair Value

02319 is trading within a range we consider fairly valued.
Price
HKD 19.40
Fair Value
HKD 22.00
Uncertainty
Medium
1-Star Price
HKD 26.50
5-Star Price
HKD 16.00
Economic Moat
Yjmkgr
Capital Allocation
Zgkvckbhw

Bulls Say, Bears Say

Bulls

Mengniu could leverage its liquid milk distribution network to boost sales for fresh milk, a growing, underpenetrated and higher margin product category.

Bears

Mengniu invested around 10% of its revenue in advertising and promotions annually, which shows customer switching costs could be low. Elevated selling expenses could erode profitability in the long term if it becomes inefficient.

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News

Trading Information

Previous Close Price
HKD 17.08
Day Range
HKD 16.5217.30
52-Week Range
HKD 16.0034.55
Bid/Ask
HKD 16.80 / HKD 16.82
Market Cap
HKD 66.10 Bil
Volume/Avg
39.1 Mil / 17.9 Mil

Key Statistics

Price/Earnings (Normalized)
11.07
Price/Sales
0.61
Dividend Yield (Trailing)
2.64%
Dividend Yield (Forward)
3.16%
Total Yield
2.64%

Company Profile

China Mengniu Dairy, or Mengniu, is China’s second-largest dairy producer by market share. The company produces a wide range of dairy products including liquid milk, yogurt, ice cream, milk formula and cheese. Liquid milk, composed of milk, milk beverages and yogurt, contributed close to 80% of Mengniu’s revenue in 2022. Flagship lineups include Deluxe, Mengniu Pure Milk, Just Yogurt and Yoyi C. Mengniu also owns two infant formula brands including Yashili and Bellamy as well as Milkground, a cheese brand.
Sector
Consumer Defensive
Industry
Packaged Foods
Stock Style Box
Large Value
Total Number of Employees
46,064

Competitors

Valuation

Metric
02319
NSRGY
600887
Price/Earnings (Normalized)
11.0720.2817.90
Price/Book Value
1.356.543.40
Price/Sales
0.612.711.40
Price/Cash Flow
5.9016.6010.88
Price/Earnings
02319
NSRGY
600887

Financial Strength

Metric
02319
NSRGY
600887
Quick Ratio
0.990.490.70
Current Ratio
1.200.830.99
Interest Coverage
4.348.566.62
Quick Ratio
02319
NSRGY
600887

Profitability

Metric
02319
NSRGY
600887
Return on Assets (Normalized)
5.00%10.01%6.81%
Return on Equity (Normalized)
14.46%34.58%18.67%
Return on Invested Capital (Normalized)
6.28%14.97%9.64%
Return on Assets
02319
NSRGY
600887
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