HK Stock Market Move | MENGNIU DAIRY (02319) surged over 5% in midday trading, with last year's net profit margin growth exceeding market expectations. Cost control and operational efficiency improvements were achieved.

MENGNIU DAIRY (02319) rose more than 5% intraday and rose 3.7% to HK$18.5 by the time of the press release, with a turnover of HK$3.18 billion. In terms of news, recently, MENGNIU DAIRY issued a profit warning announcement stating that its subsidiary Bellamy will have goodwill and related intangible assets impairment provisions, and its joint venture company CH MODERN D incurred losses from changes in fair value of dairy cows and related goodwill impairment. These two factors have led to a significant year-on-year decrease in Mengniu's net profit for the 2024 financial statements, triggering a profit warning. China International Capital Corporation (CICC) believes that Mengniu's profit warning is mainly due to accumulated impairment provisions, but excluding these factors, Mengniu's natural profit margin growth last year exceeded market expectations. Goldman Sachs released a research report stating that MENGNIU DAIRY recently issued a profit warning, but the stock price performance reflects positively on Mengniu's good cost control and operational efficiency improvement capabilities during last year's economic downturn cycle. They also believe that there is still further room for profit visibility and valuation revaluation to increase. After Mengniu issued a profit warning, the bank raised its forecast for last year's recurring profits by 17%, and the forecast for 2025 to 2026 was raised by approximately 8 to 9%, mainly benefiting from effective expense control and continued cost efficiency, especially the cost benefits brought about by the decline in raw milk prices in the first half of the year.