Mengniu Dairy (2319 HK) reported a net profit drop of 10.1% YoY in 2H21, missing estimates due to lower gross profit margin (GPM). Despite this, the company maintained a 30% dividend payout and guided for low-teen revenue growth and a 30-50bps OPM expansion in 2022. Revenue grew 9.7% YoY in 2H21, driven by liquid milk and new products, with Milk Deluxe, pure milk, and Just Yogurt sales increasing by 33%, 23%, and 22%, respectively. The company is well-positioned with investments in branding, new products, routes-to-market, and digital transformation. Analysts at Huatai Research maintain a BUY rating with a target price of HKD53.6, based on 1SD above its historical average PE of 26.8x since 2018.
