MENGNIU DAIRY: Industry Downturn Prolonged, Revenue Expected to Struggle in Second Half

The analyst rating for MENGNIU DAIRY was influenced by several factors outlined in Morgan Stanley's report. The key reasons for the rating include: 1. Prolonged Weak Liquid Milk Demand: The report indicates that there has been a sustained decline in demand for liquid milk, which negatively impacts the company's sales and profitability. 2. Market Share Loss: MENGNIU DAIRY is experiencing a loss in market share, further contributing to the challenges in maintaining sales levels. 3. Revised Earnings Forecasts: The EPS (earnings per share) forecast for 2025 was slashed by 13%, and forecasts for 2026 and 2027 were reduced by 7-8%. This reflects a more cautious outlook on the company's financial performance. 4. Sales Forecast Reduction: There was a 7% reduction in the sales forecast for 2025, indicating expected lower revenue generation. 5. Low Base for Future Growth: The report suggests that the low base for 2026 and 2027 may hinder growth prospects in those years. Despite these challenges, the target price was adjusted from HK$20 to HK$18.5, and the Overweight rating was maintained, suggesting that analysts still see potential for the stock to outperform the market in the long term, despite the near-term headwinds.