UBS: MENGNIU DAIRY (02319) growth momentum maintained; "Buy" rating reiterated.

UBS issued a research report stating that MENGNIU DAIRY (02319) has maintained its growth momentum, and continued operating margin expansion, business mix improvement, and stronger shareholder returns should drive further re-rating. The "Buy" rating and target price of HK$22 are reiterated. UBS recently exchanged views with MENGNIU DAIRY's management. Management reiterated its FY2026 guidance of high-single-digit year-on-year revenue growth and an operating margin of at least 8%, holds a positive view on maintaining solid sales growth next year, and expects operating margin to expand by another 30 to 50 basis points. The medium-term target remains for revenue to return to above RMB100 billion, with higher-value-added businesses driving a more diversified portfolio. The bank noted that among liquid milk products, fresh milk continued to outperform, recording approximately 30% growth, while low-temperature yogurt resumed growth, and Tesile pricing and sales recovery were also better than expected. Milk powder maintained strong momentum, driven by Bellamy's to growth of over 50%; cheese products recorded double-digit growth, and international business also recorded double-digit growth. The overall growth mix is gradually shifting from traditional liquid milk to higher-value-added businesses such as cheese, milk powder, ice cream, international, and medical nutrition, supporting mix improvement and margin expansion. Management expects raw milk supply and demand to tighten over the next two to three years, driving a moderate price recovery; capital expenditure will be maintained at a restrained level of approximately RMB2 billion next year, and strong free cash flow provides room for further improving dividend payouts and shareholder returns.