According to a research report from Jianyin International, Mengniu (02319.HK) has been affected by factors such as slowing retail demand, intensifying competition, and its own inventory control, significantly impacting its revenue in the second quarter. Although the demand for liquid milk remains relatively weak in the third quarter and there has been no improvement in holiday sales in October and November, the bank expects that as pressure from another round of large-scale channel inventory control eases, the revenue decline will narrow from 13% in the first half to 2% in the second half. Additionally, the decrease in raw milk costs and rigorous cost control should sustain the group's profit expansion, with gross margin and Operating profit margin expected to improve by 0.9 and 0.4 percentage points year-on-year in the second half, respectively.

Jianyin International stated that Mengniu's current top priority is to improve operational efficiency. The bank believes that healthier inventory, along with a more rational competitive environment, stable raw milk prices, and prudent cost control will enhance the group's profitability. The bank anticipates that in the fiscal years 2025 to 2026, the Operating profit margin will average an annual expansion of 0.3 percentage points, maintaining moderate performance growth.

The bank has raised its earnings forecast for the group for the fiscal years 2024 and 2025 by 1% and 2%, reflecting improvements in product mix and profits, and has adjusted the Target Price from 13.4 yuan to 19.1 yuan, upgrading the rating from 'Neutral' to 'Outperform the market.'