2319.HK · HKG · Consumer Defensive

China Mengniu Dairy Company Limited

Also onConsensus Drift

Implied value per share

HKD 26.75

Market price

HKD 17.77

Implied upside

+50.5%

5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case · CNY model at 1.1708

AdjustedReports in CNY, trades in HKD. Modelled in CNY, converted at the end.

NoteRisk-free rate is an assumption: HKD assumption - no free live source available for this market.

Value Per Share

Perpetuity growth

HKD 26.75+50.5%

Exit multiple

HKD 16.98-4.4%

Market price

HKD 17.77

Same forecast, different terminal treatment. Percentages vs price.

Assumptions

Discount rate (WACC)5.72%Growth after the forecast2.50%Exit EV/EBITDA6.8xTax rate16.50%Capex, % of revenue4.14%Depreciation, % of revenue3.58%Working capital, % of revenue growth-7.12%

Forecast Cashflows

Reporting currency (CNY). Outflows negative.

Nominal FCFFDiscounted to todayCNY

Line	FY26	FY27	FY28	FY29	FY30	CAGR
Revenue	CNY 79.1bn	CNY 76.0bn	CNY 73.1bn	CNY 70.2bn	CNY 67.5bn	-3.9%
EBIT	CNY 6.0bn	CNY 5.7bn	CNY 5.5bn	CNY 5.3bn	CNY 5.1bn	-3.9%
NOPAT	CNY 5.0bn	CNY 4.8bn	CNY 4.6bn	CNY 4.4bn	CNY 4.3bn	-3.9%
Add depreciation & amortisation	CNY 2.8bn	CNY 2.7bn	CNY 2.6bn	CNY 2.5bn	CNY 2.4bn	-3.9%
Less capital expenditure	CNY -3.3bn	CNY -3.1bn	CNY -3.0bn	CNY -2.9bn	CNY -2.8bn	-3.9%
Less increase in working capital	CNY -226.7m	CNY -218.0m	CNY -209.5m	CNY -201.4m	CNY -193.6m	-3.9%
Free cashflow to firm	CNY 4.3bn	CNY 4.2bn	CNY 4.0bn	CNY 3.8bn	CNY 3.7bn	-3.9%
Discount factor	0.9726	0.9200	0.8702	0.8232	0.7786	-
Present value	CNY 4.2bn	CNY 3.8bn	CNY 3.5bn	CNY 3.2bn	CNY 2.9bn	-9.1%
Present Value Of The Forecast	CNY 17.6bn

Discount Rate

Source shown per component. All overridable above.

Risk-free rate	3.20%	HKD assumption - no free live source available for this market (assumption)
Equity risk premium	7.00%	Market assumption
Beta	0.519	Reported 0.282, pulled toward 1.0 (Blume)
Cost of equity	6.83%	Risk-free + beta x equity risk premium
Cost of debt	3.23%	Interest expense / average total debt
Market capitalisation	CNY 68.7bn	73.0% of capital
Total debt	CNY 25.4bn	27.0% of capital, book value as a proxy
Tax rate	16.5%	Effective, capped at statutory
WACC	5.72%	E/V x Re + D/V x Rd x (1 - t)

Terminal Value

Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

Perpetuity growth at 2.50%

Value per shareCNY 22.85

80% of EV

Forecast FCFF, final year: CNY 3.7bn
Capex at depreciation, working capital in reinvestment: CNY 4.3bn
Less reinvestment at g/ROIC (32.7% of NOPAT): CNY -1.4bn
Capitalised: CNY 2.9bn
ROIC (reported): 7.6%

Terminal value, undiscounted: CNY 93.0bn
Terminal value, discounted: CNY 72.4bn
Enterprise value: CNY 89.9bn
Less net debt: CNY 645.3m
Equity value: CNY 89.3bn

Exit at 6.8x EBITDA

Value per shareCNY 14.50

69% of EV

Terminal value, undiscounted: CNY 51.1bn
Terminal value, discounted: CNY 39.8bn
Enterprise value: CNY 57.3bn
Less net debt: CNY 645.3m
Equity value: CNY 56.7bn

Spread between methods: 45%.

Sensitivity

Value per share (CNY) by discount rate and long-run growth.

Long-run growth
Discount rate	1.50%	2.00%	2.50%	3.00%	3.50%
3.72%	39.17	45.82	57.88	86.66	247.56
4.72%	27.29	29.42	32.48	37.28	45.99
5.72%	21.04	21.83	22.85	24.22	26.19
6.72%	17.18	17.45	17.77	18.17	18.67
7.72%	14.58	14.63	14.68	14.73	14.78

Outlined: this model. Green text: above today's price of 15.18. Shading: distance from this model's own value.

Priced In

What each input would have to be to justify the current price, one at a time.

Input	Model	Implied	Gap
Revenue growth, every year	-3.9%	-11.6%	-7.7pp
EBIT margin	7.6%	5.1%	-2.5pp
Discount rate	5.7%	7.5%	+1.8pp

Download as Excel

Live formulas, not pasted numbers - edit a driver and the workbook reprices.

Yahoo Finance and RBA data. General information, not advice. Methodology.