by winston » Tue Aug 04, 2015 4:11 am
not vested
Dairy drops on `sell' call
China Mengniu Dairy (2319) shares plunged as much as 12.7 percent yesterday after Goldman Sachs downgraded the stock to "sell" and slashed its target price by 33 percent to HK$30.10.
Shares of the mainland's second-largest dairy producer hit a low of HK$30.50 at noon, but recovered to close at HK$33.55, down 4.28 percent. This chalked up a three-week high turnover of HK$376 million.
Goldman Sachs said in a research report that weak consumption had led to an oversupply in China's dairy market, forcing Mengniu to lower prices in an attempt to move six months' worth of inventories.
Mengniu uses raw milk produced in the mainland which is dearer than in Europe and New Zealand, tempering profit growth.
According to the report, Mengniu deployed inefficient marketing strategies while restructuring its distributors and sales team, which had led to a loss of market share.
Goldman Sachs also lowered Mengniu's price-to-earnings ratio target to 18.4 times, down from 23 times a 20 percent discount to the average valuation among its peers.
Shares of its peers also performed poorly yesterday, ahead of the release of the New Zealand dairy index today a bimonthly index of dairy prices which has fallen nine times in a row.
Yashili (1230) fell 4 percent to HK$2.16 and China Modern Dairy (1117) lost 2.79 percent.
Source: The Standard HK
It's all about "how much you made when you were right" & "how little you lost when you were wrong"