Cost pressure reduced; mix upgrade continues
? Mengniu reported a revenue increase of 18.6% yoy to Rmb88bn, and net profit growth of 42.6% yoy to Rmb5.0bn in FY21, slightly above our expectations, thanks to a higher profit contribution from China Modern Dairy and other associates.
? We now expect FY22F sales growth of 12.6% yoy, and net profit growth of 16.5% yoy, since we expect stable GPM due to the flattish raw milk price, and a lower sales and marketing expenses ratio in FY22F.
? Mengniu’s fresh milk business became profitable in FY21, and it aims to achieve an OPM higher than the Group average in the next three years.
? The cheese business aims to become two to three times larger than the second-place player, complemented by Arla and Milkground.
? Reiterate Add with new DCF-based TP of HK$54.4.