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Inner Mongolia Yili Industrial Group Co Ltd Class A 600887

Morningstar Rating
CNY 28.88 −0.41 (1.40%)
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Company Report

Yili Earnings: Modest Top-Line Trend Remains a Near-Term Headwind; Retain Fair Value Estimate

Its modest top-line trend remained as the primary drag to wide-moat Yili’s fourth-quarter 2023 and first-quarter 2024 results. The company decided to reduce channel inventories during the first quarter, which led to a sluggish top-line trend for liquid milk. We think this implies weaker-than-expected sell-out during Lunar New Year, which is supposed to see firm festive demand. We lowered our 2024 revenue projection by 4% to factor in the near-term headwind and think liquid milk sales could remain soft before a turnaround in the fourth quarter. Management also acknowledged the need to increase channel expenses for channel inventory reduction. Despite lower sales and higher expenses, the one-off investment income of CNY 2.58 billion due to the sale of a subsidiary’s shares in the first quarter boosted our 2024 net income projection by over 20%. However, our 2025-27 earnings forecasts are largely unchanged, and we retain our fair value estimate at CNY 36 per share, which implies 17 times 2024 price/earnings, 15 times EV/EBITDA, and a 4.0% dividend yield.

Price vs Fair Value

600887 is trading within a range we consider fairly valued.
Price
CNY 28.88
Fair Value
CNY 42.00
Uncertainty
Medium
1-Star Price
CNY 55.30
5-Star Price
CNY 72.90
Economic Moat
Ccc
Capital Allocation
Kbmdgfxmk

Bulls Say, Bears Say

Bulls

Yili’s success in liquid milk puts the company at an advantaged position to expand its category coverage and drive ROICs.

Bears

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

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News

Trading Information

Previous Close Price
CNY 29.29
Day Range
CNY 28.8229.38
52-Week Range
CNY 25.2030.11
Bid/Ask
CNY 28.87 / CNY 28.88
Market Cap
CNY 183.85 Bil
Volume/Avg
51.3 Mil / 46.0 Mil

Key Statistics

Price/Earnings (Normalized)
18.59
Price/Sales
1.47
Dividend Yield (Trailing)
3.56%
Dividend Yield (Forward)
3.56%
Total Yield
3.60%

Company Profile

Inner Mongolia Yili Industrial Group is the largest dairy products producer in China, with the majority of revenue (around 70%) coming from the liquid milk segment. The company also manufactures ice cream, milk powder and beverages. Some flagship lineups include Satine, Yili Pure Milk, Ambrosial and Changqing. The company also expands its overseas presence through setting up R&D centers and acquiring foreign dairy brands such as Westland in New Zealand and Chomthana in Thailand.
Sector
Consumer Defensive
Industry
Packaged Foods
Stock Style Box
Large Core
Total Number of Employees
64,305

Competitors

Valuation

Metric
600887
06186
02319
Price/Earnings (Normalized)
18.597.789.89
Price/Book Value
3.111.351.26
Price/Sales
1.471.700.55
Price/Cash Flow
9.547.397.02
Price/Earnings
600887
06186
02319

Financial Strength

Metric
600887
06186
02319
Quick Ratio
0.732.690.85
Current Ratio
0.983.061.05
Interest Coverage
6.4883.443.95
Quick Ratio
600887
06186
02319

Profitability

Metric
600887
06186
02319
Return on Assets (Normalized)
6.65%9.63%5.03%
Return on Equity (Normalized)
18.63%14.14%14.54%
Return on Invested Capital (Normalized)
8.50%11.45%6.45%
Return on Assets
600887
06186
02319
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