Lyon believes that the year-on-year drop of 12% in the price of raw milk in China reflects supply and demand imbalance, and is affected by the slower-than-expected impact of excess production capacity reduction programs. The bank's channel survey shows that demand for liquid milk has weakened, with sales in May and June falling by double digits year-on-year. At present, more discounts are in response to weak demand, and product prices are expected to return to normal after demand pick-up and destocking are completed. Lyon prefers Mengniu, based on its low valuation, unchanged leadership position, and potential for improved shareholder returns, and believes that the stock price has also reflected the challenges it is facing.

The bank lowered its net income forecast for Mengniu from 2021 to 2026 by 10% to 14%, with a target price of HKD 22 and a rating of "outperform the market". The bank also lowered its net income forecast for Yili from 2021 to 2026 by 6% to 9%, with a target price of CNY 32 and a rating of "outperform the market".