＜Research＞Macquarie Cuts TP of MENGNIU DAIRY to $23; Raw Milk Price Fall Enough to Offset Negatives From Competition

　　Macquarie expected in a report that MENGNIU DAIRY (02319.HK) +0.540 (+4.279%) Short selling $104.58M; Ratio 18.060% 's 1H24 results would be weak, with revenue and net profit expected to fall by 6% and 24% YoY due to weak demand for milk and fierce competition in the market.

　　However, given that industry raw milk prices fell further by more than 10% in 1H, Macquarie believed lower raw material prices would more than offset the negative impact of competition. MENGNIU's core operating margin is expected to improve by 0.3 ppts in the half-year, in line with the group's guidance of a 0.3 to 0.5 ppt improvement in operating profit margin.

　　Related NewsJPM Downgrades MENGNIU DAIRY (02319.HK) to Neutral, Chops Target Price 57% to $13

　　Macquarie added that unfavourable factors such as impairment losses on whole milk powder inventories and losses on pasture investments are not expected to continue into next year, and the industry may reach a balanced supply and demand situation in 2H24 at the earliest. The broker lowered its revenue and profit forecasts for MENGNIU by 4% and 20% this year. Furthermore, Macquarie expected MENGNIU to control capital expenditure and enhance shareholder returns in the face of weak industry demand, with a full-year dividend yield of 3.8%.

　　Accordingly, Macquarie dropped its target price on MENGNIU from $32 to $23 and maintained its Outperform rating.

　　(HK stocks quote is delayed for at least 15 mins.Short Selling Data as at 2024-07-30 16:25.)

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