MENGNIU DAIRY (2319)

Business Summary:

China Mengniu Dairy manufacture and distribute quality dairy products in China. It is one of the leading dairy product manufacturers in China, with MENGNIU as its core brand. Mengniu offers diverse products including liquid milk products, ice cream, milk formula and cheese.

Mengniu ranked as “Global Dairy Top 10” in 2021, and placed 31th on BrandZ™’s list of most valuable Chinese brands, TOP10 of brand contribution in 2020. Mengniu also made it again among Brand Finance’s list of the top 500 most valuable brands of the world in 2020. As at the end of 2021, the Group’s annual dairy production capacity reached 11.66 million tons. In March 2022, Mengniu was included as a constituent of HSI ESG Enhanced Index and HSI ESG Enhanced Select Index.

Financial Summary:

For the year ended 31 December 2021, revenue rose 15.9% from  RMB76,034.8 million to RMB88,141.5 million, when compared with the same period last year. The revenues of ice cream, liquid milk and milk formula businesses recorded an increase of 61.0%, 12.9%, and 8.2% respectively.

Owing to the increase in revenue and operating efficiency, profit attributable to owners of the company rose 42.6% year-on-year to RMB5,025.5 million (2020: RMB3,525.0 million). Net cash flows from operating activities increased 41.1% from  RMB5,347.7 million to RMB7,544.7 million. Basic earnings per share increased by 42.0% to RMB 1.274. Gross profit margin slightly narrowed by 1.0 % to 37.7%; owing to the impact of the increased raw milk price.

Risk:

(a) the outbreak of coronavirus may have affected the sales of  dairy product.

(b) sales may be affected by news about dairy food safety issues

(c) gross profit margin may be affected by raw material price volatility

(d) Among the other major food dairy company peer, Mengniu ranks the highest P/E ratio of 24 and the highest P/B (ratio: 3.3)

(e) higher-than-expected cost for material sourcing, production cost & network expansion may occur.

Technical Analysis:

The stock prices hit yearly high of $51.3 on 1 Mar, 2022. The price has dropped by 33% to recent-low of $34.45.  It is suggested to buying at the price below $38.0. The target price for medium term is $41.0. Cut-loss price will be $25.0.

References

www.hkex.com.hk

www.etnet.com.hk

www.afe-solutions.com

I, Gary Tam, am a licensed person under the Securities and Futures Commission. Until the date this commentary was published, neither I and/or my affiliates are the beneficiary of the securities mentioned herein or are entitled to any financial interests in relation thereto.