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China Mengniu Dairy Co Ltd 02319

Morningstar Rating
HKD 16.00 −0.52 (3.15%)
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Company Report

Mengniu to Improve Operational Efficiencies Amid Soft Demand Growth Outlook

Mengniu is the second-largest dairy producer in China, with majority of its revenue derived from the liquid milk business, while ice cream and cheese are smaller segments. After management change in 2016, Mengniu has restructured its organization and distribution channel, which in our view has rejuvenated its liquid milk business and resulted in rebounding profit growth. The company’s premium shelf stable milk lineup, Deluxe, has become the number one brand in China since 2020, which we think reflects improving channel execution and effective portfolio construction. Mengniu has currently built out a competitive liquid milk portfolio spanning shelf stable, yogurt and chilled products.

Price vs Fair Value

02319 is trading at a 28% premium.
Price
HKD 16.52
Fair Value
HKD 73.00
Uncertainty
Medium
1-Star Price
HKD 56.19
5-Star Price
HKD 17.50
Economic Moat
Ybkqr
Capital Allocation
Pxzbptnc

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 16.52
Day Range
HKD 15.9216.42
52-Week Range
HKD 15.0832.05
Bid/Ask
HKD 15.98 / HKD 16.00
Market Cap
HKD 62.96 Bil
Volume/Avg
19.3 Mil / 21.8 Mil

Key Statistics

Price/Earnings (Normalized)
10.57
Price/Sales
0.59
Dividend Yield (Trailing)
2.59%
Dividend Yield (Forward)
3.10%
Total Yield
4.08%

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
600887
GIS
Price/Earnings (Normalized)
10.5718.8115.20
Price/Book Value
1.353.154.21
Price/Sales
0.591.482.04
Price/Cash Flow
7.519.6512.61
Price/Earnings
02319
600887
GIS

Financial Strength

Metric
02319
600887
GIS
Quick Ratio
0.850.730.33
Current Ratio
1.050.980.66
Interest Coverage
3.956.487.70
Quick Ratio
02319
600887
GIS

Profitability

Metric
02319
600887
GIS
Return on Assets (Normalized)
5.03%6.65%8.71%
Return on Equity (Normalized)
14.54%18.63%27.32%
Return on Invested Capital (Normalized)
6.45%8.50%13.78%
Return on Assets
02319
600887
GIS
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