China Mengniu Dairy Company Limited

China Mengniu reported 2023 revenue up 6.5%. Gross profit increased faster than revenue, and operating profit margin rose 40 basis points for the full year, in line with guidance. Management also cited 8.35 billion of net cash inflow. For 2024, the company guided to mid-to-low single-digit revenue growth and another 30 to 50 basis points of operating profit margin expansion. On bulk milk powder impairment, management said 2024 will still see impairment due to oversupply of raw milk, but lower raw milk prices should offset part of that impact year on year.

Lu Minfang framed 2023 as a year of strategic progress despite a difficult dairy backdrop, emphasizing stronger core execution, better channel structure, and a push into new growth areas such as cheese, functional nutrition, and Southeast Asia. He repeatedly stressed that Mengniu will not pursue price wars, but instead focus on product mix, premiumization, R&D, digitalization, and long-term brand building. His tone was confident and forward-looking, while acknowledging the industry remains in an oversupply and slower-growth phase.

Zhang Ping provided the clearest financial guidance: 2024 revenue is expected to grow at a mid-to-low single-digit rate, and operating profit margin is targeted to improve by 30 to 50 basis points. He said the company recorded a 300 million impairment on bulk milk powder in 2023, and although oversupply of raw milk will continue in 2024, falling raw milk prices should partly offset the impairment effect. The broader message from management was that capex is past its peak, free cash flow should improve, and the higher dividend payout ratio reflects that stronger cash profile.

Analysts asked about the durability of growth versus peers, the risk of more impairment, whether strategy will change under new CEO Gao Fei, and whether there could be write-downs in cheese or Milkground. Management answered that strategies will stay stable, but execution should improve, especially around acquiring and integrating businesses, allocating more resources to faster-growing brands, and expanding premium products. On Milkground, management said the business remains stable, sees development potential in cheese, and does not currently see much pressure for a write-down. They also said overseas expansion should be patient and organic, with ICE in Southeast Asia cited as the model to follow.