Key Takeaways
CLSA maintained its "High-Conviction Outperform" rating on Mengniu Dairy, setting a HKD21.1 price target on expectations of a raw milk price rebound in China.
"Stabilizing raw milk prices will benefit leading dairy companies with strong upstream resource control," CLSA said in its research report, identifying Mengniu as a key beneficiary.
The brokerage cited a significant reduction in China's dairy cow herd, which dropped from 6.5 million in December 2023 to 5.8 million by March 2026. This capacity reduction, coupled with rising beef prices accelerating the culling of less productive cows, points to a tighter future supply.
The forecast suggests a bottom for raw milk prices, positioning Mengniu to leverage its high exposure to liquid milk for a considerable earnings rebound. CLSA expects the price recovery to begin in the second half of 2026.
The positive outlook extends to other major players, with CLSA also assigning an "Outperform" rating to competitor Yili, setting a target price of RMB35 for its Shanghai-listed shares, citing a diversified business mix.
The rating affirmation suggests the cycle of overcapacity in China's dairy industry is easing, providing a clearer path to profitability for major producers. Investors will watch for confirmation of stabilizing demand and the release of new processing capacity in 2025 to support the 2H26 price rebound thesis.
This article is for informational purposes only and does not constitute investment advice.
