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雷达卡
Table of Contents
Executive summary ........................................................................... 3
Dairy industry is on the road to recovery; brighter outlook in 2009 ..........................................3
Valuation ..................................................................................................................................3
Risks – Food quality scandals, input cost volatility....................................................................3
Dairy consumption recovers after melamine incident ................... 4
Key points ................................................................................................................................4
Dairy consumption has recovered after the melamine scandal ................................................4
Reason 1: Milk is becoming a staple in the Chinese diet..........................................................5
Reason 2: New government regulations are helping to restore consumer confidence ............6
Different growth drivers in urban and rural areas......................................................................6
Fragile dairy supply chain needs to be fixed................................... 8
Key points ................................................................................................................................8
Weak point #1: Too many middlemen; unbalanced bargaining power .....................................8
Weak point #2: Erratic quality of raw milk supply ...................................................................10
Weak point #3: Dairy processors have weak quality control on raw milk ...............................11
Weak point #4: Loose regulatory control ................................................................................13
Future dairy industry trends........................................................... 14
Key points ...............................................................................................................................14
Trend 1: Dairy output growth to moderate .............................................................................14
Trend 2: Raw milk price is likely to remain stable ...................................................................14
Trend 3: Faster industry consolidation; higher entry barriers ..................................................16
Stock implications........................................................................... 19
We rate Mengniu Dairy a Buy for the following reasons: .......................................................19
Faster-than-expected sales recovery after melamine-tainted milk scandal; Mengniu has
maintained its market leadership ............................................................................................20
Deluxe-OMP incident is a short-term hiccup for Mengniu’s high-end product sales ..............20
Earnings model – should return to profitability in 2009...........................................................21
Buy Mengniu with a TP of HKD14.5 .......................................................................................24
Peer comparison.............................................................................. 27
Comparing Mengniu with other Chinese dairy processors .....................................................27
Valuation comp table ...................................................................... 30
Appendix A: Melamine scandal...................................................... 31
How did the contamination happen? ......................................................................................31
Appendix B: PRC regulations on the dairy industry ..................... 38
Appendix C: Company background ............................................... 40
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