Morgan Stanley's research report stated that due to weak milk demand and intense market competition, Mengniu's performance in the first half of the year is expected to be weak, with revenue and net profit expected to decline by 6% and 24% respectively. However, considering that industry raw milk prices fell by more than 10% in the first half of this year, Morgan Stanley believes that the decline in raw material prices is sufficient to offset the negative impact of market competition, and Mengniu's core operating profit margin in the first half of the year is expected to increase by 0.3 percentage points, meeting the guidance of the group's operating surplus margin increasing by 0.3 to 0.5 percentage points.
The bank also pointed out that adverse factors such as write-down losses of full-fat milk powder inventory and losses from livestock farm investments are not expected to continue into next year. The industry may reach a supply-demand balance as early as the second half of this year, and Mengniu's revenue and profit forecasts for the year have been lowered by 4% and 20% respectively. Morgan Stanley expects that under weak industry demand, Mengniu will control capital expenditures and strengthen shareholder returns. The expected full-year dividend yield is 3.8%, and the target price has been lowered from HKD 32 to HKD 23. The rating is still "outperform".