Damo released a research report stating that it gave Mengniu Dairy (02319) a “outperforming market” rating, and the target price was lowered by 13.3% from HK$30 to HK$26. It is believed that the stock's valuation is still attractive in terms of growth prospects compared to the main raw material industry.
The bank said it will lower Mengniu Dairy's earnings per share forecast for this year and next by 8%-9% because lukewarm demand in 2024 is likely to continue, and it will take time for new products to drive growth, so sales forecasts for 2024 and 2025 will be lowered by 2% and 3%, respectively. Damo currently expects the company's total sales to increase by 4% and 5% in 2024 and 2025, respectively. Due to the provision for withholding tax, Mengniu's effective tax rate will be higher, and Damo also expects a profit of 1.74 yuan per share in 2026.