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<Research> BofAS: Irrational Sell-off in MENGNIU DAIRY (02319.HK) Creates Attractive Buy Opportunity
Recommend 5 Positive 6 Negative 6 |
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BofAS published a research report stating that the recent share price of MENGNIU DAIRY (02319.HK) has been subject to an irrational sell-off, mainly driven by misinformation and misunderstandings, thereby creating a particularly attractive Buy opportunity. Channel checks by the broker indicate that Mengniu recorded positive sales growth in May, in contrast to market rumors of potential declines. In addition, April and May are traditionally off-season months, with market focus on channel inventory levels, making it more difficult to gauge underlying trends. The company’s year-to-date operating performance has also exceeded the midpoint of its FY2026 sales growth guidance of mid- to high-single digits. This is supported by a low base in 2H25 and 1H25 (with sales declining 7.6% and 6.9%, respectively), as well as the expected benefit from an earlier Lunar New Year in 2027. BofAS added that since 2024, raw milk production capacity in China has been reduced by approximately 10% (from 6.5 million heads to 5.84 million heads). Contract milk prices in China have stabilized at RMB3 per kilogram since mid-2025. At the same time, non-contract milk prices among smaller peers have converged with contract milk prices, with discount rates narrowing from a peak of over 50% to less than 10% currently. This has leveled the competitive landscape and supported Mengniu’s market share recovery. The broker expects the capacity reduction process to resume, supporting an eventual supply-demand balance and a moderate recovery in milk prices. Leading companies such as Mengniu are expected to benefit from lower procurement costs than peers, further market share recovery, and improvement in average selling prices. BofAS expects Mengniu’s dividend yield to reach 4.5% in 2026. The broker reiterated its Buy rating on Mengniu, with TP maintained at HKD21. (ad/u) Auto-translated by AI This article was automatically translated by AI, the original language version should be considered the authoritative version. AASTOCKS.com Limited does not guarantee its accuracy or completeness and accepts no liability for any damages or losses arising from the use of this translation. More Details
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