Morgan Stanley: MENGNIU DAIRY's operating profit last year was roughly in line with expectations, rating "Overweight"

Morgan Stanley published a research report indicating that MENGNIU DAIRY (02319.HK) preliminary sales for 2025 are in line with the bank's forecast, with an implied total sales decline in the second half of 2025 slightly greater than in the first half. MENGNIU mentioned that liquid milk is gradually recovering in the second half of 2025. Operating profit also roughly aligns with Morgan Stanley's predictions. Excluding impairment not considering tax impacts, the median net profit is RMB 3.8 billion, compared to Morgan Stanley's forecast of RMB 3.6 billion and the market consensus of about RMB 4 billion. Details of the impairment are pending performance announcements, and since the company stated that it has no significant impact on operations, the market may not view it as a risk.

The bank expects market focus to be on the pace of recovery in 2026. According to the bank's channel checks around the Lunar New Year, liquid milk growth has exceeded expectations year-to-date. Management's guidance on the outlook for 2026 and the turning point for raw milk prices are key areas of focus. Morgan Stanley has given MENGNIU DAIRY an "Overweight" rating, with a target price of HKD 19