HSBC-Mengniu Dairy Industry (China) (2319.HK) Buy Rating: Key Points from Singapore Investor Meeting

China Mengniu Dairy(2319 HK) Buy:Keytakeawaysfrom NDR China ◆Managementseemsmore confidenceon its 2026 earningsoutlook, supported bypositive momentum across segments MAINTAIN BUY TARGET PRICE(HKD)PREVIOUS TARGET(HKD)24.1023.80SHARE PRICE(HKD)UPSIDE/DOWNSIDE17.19+40.2%(as of01 Jun 2026) ◆Sustainable growth beyond 2026remainskey for re-rating;we raise 2027-28eearnings by3-4% ◆Maintain Buy; TPupdated toHKD24.10(fromHKD23.80)onrevised estimates andunchanged target P/Eof15.1x We hostedthe managementofMengniu Dairy, Milkground (600822.CH),and ChinaModern Dairy (1117.HK) for a joint investor roadshow in Singapore on28May. Encouraging recovery trendsupports2026target:Mengniu Dairy’s managementmaintained itsmidtohighsingle-digitrevenue growth target for 2026 butseemsmoreconfident in achievingthe target, supported by:1) improving liquid milkmixwith MilkDeluxeoutperformingtheUHT segment; 2)continued outperformance infresh milk; 3)strong growth inice cream; 4)robust growth in cheese, especially the B2B business; and We raise 2027-28eearnings by3-4%:Our 2026eearningsestimates arelargelyunchanged at RMB4,998m, butweraise2027/28enet profitby3%/4%driven byhigher revenueassumptions. We now expectnet profitCAGR of10%(previously8%)over 2026-28e, supported by continued expansion ofnon-liquid milkbusinessesthroughchannelpenetrationopportunities(i.e. under snack discounter, membership Lina Yan*, CFAConsumer Analyst, Hong Kong and mainland China The Hongkong and Shanghai Banking Corporation Limitedlinayjyan@hsbc.com.hk+852 2822 4344 Sustainabilityremainskey for re-rating:Following two years of portfoliorationalisation and adjustment,Mengniu is set to recover after its revenue troughedin2025.The stocktradesat11.6x1-year forward P/E vs.a historicalaverage of12.3x(range of7.6-20.2x) since 2023,reflecting investor concerns overits growth beyond Yimin Wang*Associate, China Consumer ResearchThe Hongkong and Shanghai Banking Corporation Limitedyimin.wang@hsbc.com.hk Maintain Buy withupdatedTP of HKD24.10(fromHKD23.80):Our TP is based onanunchangedtargetP/E of15.1xapplied to1-year forwardEPS.Our revisedTPimplies 2027eP/E of14.3x and dividend yield of3.8%,whichwe believe is justified * Employed by a non-US affiliate of HSBC Securities (USA) Inc, and isnot registered/ qualified pursuant to FINRA regulations Disclosures & Disclaimer This report must be read withthe disclosures and the analyst certifications inthe Disclosure appendix, and with the Disclaimer, which forms part of it. View HSBC Global Investment Research at:https://www.research.hsbc.com Financials & valuation:China Mengniu Dairy Key takeaways from NDR ◆Management seems more confidence on its 2026 earnings outlook,supported by positive momentum across segments ◆Sustainable growth beyond 2026 remains key for re-rating; we raise2027-28eearnings by3-4% ◆Maintain Buy; TP updated to HKD24.10(fromHKD23.80) on revisedestimates and unchanged target P/E of15.1x Earnings revisions For 2026ewe raise revenue growth to7.5%y-o-y(from5.4%)based on positive growthmomentum across its product segments. However,ournet profit estimateislargely unchangedas we remain cautiousaboutthe higher petro-related input costs, whichmight translate to cost For 2027/28ewe raise revenue growth to6.0%/4.8%y-o-y(from4.5%/3.6%), mainly by raisingthe revenue CAGR forthenon-liquid milk segment to11.6%(from6.2%)whilefor liquidourrevenue CAGR estimate isunchanged at3.5%. Driven by higher revenueestimates, 2027/28enet profit is2.7%/4.0% higher. We now expect group net profit CAGR of10.4% on revenue Valuation andrisks Disclosure appendix Analyst Certification Thefollowing analyst(s), economist(s), or strategist(s) who is(are) primarily responsible for this report, including any analyst(s)whose name(s) appear(s) as author of an individual section or sections of the report and any analyst(s) named as the coveringanalyst(s) of a subsidiary company in a sum-of-the-parts valuation certifies(y) that the opinion(s) on the subject security(ies) orissuer(s), any views or forecasts expressed in the section(s) of which such individual(s) is(are) named as author(s), and anyother Important disclosures Equities: Stock ratings and basis for financial analysis HSBC and its affiliates, including the issuer of this report (“HSBC”) believes an investor's decision to buy or sell a stockshoulddepend on individual circumstances such as the investor's existing holdings, risk tolerance and other considerations and thatinvestors utilise various disciplines and investment horizons when making investment decisions. Ratings should not be used orrelied on in isolation as investment advice. Different securities firms use a variety of ratings terms as well as different rating From 23rd March 2015 HSBC has assigned ratings on the following basis: The target price is based on the analyst’s assessment of the stock’s actual current value, although we expect it to take sixto 12months for the market price to reflect this.