YILI INDUSTRIAL(600887)：FULL-YEAR GUIDANCE UNCHANGED

　　We hosted a NDR with Yili management to obtain follow-up post the company’s investor day on 14th Jul and 2Q operational update. Overall, Yili maintained its initial guidance of a HSD top line growth with a 0.3pp uptake in net margins for the year. On a sequential basis, 2Q sales has further accelerated from that of 1Q. This consists of drivers such as QoQ improvement in UHT milk, especially that of high-end UHT milk, double-digit growth in adult formula, growth in low- temp SKUs （despite a tough comp） and a stable cheese momentum over 2B channel. Separately, Yili reaffirmed that, albeit deflating raw material prices, gross margins will likely remain stable, when reasonable discounts to stimulate retail sales likely offset the savings. In other words, any improvement in profitability will be solely driven by operation cost savings. Concerning the remainder of the year, Yili remains upbeat and see scope for further recovery to take place, thanks to a high debut density from brands like Satine and Ambrosial. While we remain lukewarm on the dairy segment from a risk-reward perspective, we think Yili is a relative outperformer among its peers thanks to its operation scales, more frequent new launches and above-industry milk formula growth. We are buy-rated.
　　Raw material cost impact to GPM. Despite a small, or a LSD drop in raw milk costs, Yili expects a stable GPM for 2023E as the merit will likely be offset by a small increase in other material costs such as sugar, packaging materials, not to mention retail discounts. Mix upgrade will be the only driving force to boost GPM and financially we look for a 0.2-0.3pp hike over 2023- 25E.
　　Earnings assumptions/ changes. We largely maintain our 2023/24E estimates. For 2023E, we continue to assume 1） a 5.5%/ 20%/ 20% liquid milk/ low-temp dairy/ IMF sales growth YoY, respectively. These underpin a 7.7% 3-year revenue CAGR between 2022-25E. Combined with the GPM assumptions above, our net margins for 2023-25E are set at 8.0%/ 8.3%/ 8.7%. Overall our forecasts largely tally with management’s expectation on revenue/ pre-tax profits of RMB 135.5bn/RMB 12.5bn. We also introduced our 2025E forecasts.
　　Valuation. Our new TP is based on an updated 24.0x （from previously 25.0x） end-23E PE, which still benchmarks to its 5-year average. Comparing to Mengniu （2319HK, Buy）， which we value at -1sd below average, we assign a higher target multiple to Yili to reflects the latter’s stronger IMF business outlook in the near term.
【免责声明】本文仅代表第三方观点，不代表和讯网立场。投资者据此操作，风险请自担。

   【免责声明】本文仅代表第三方观点，不代表和讯网立场。投资者据此操作，风险请自担。