Mengniu (2319.HK) Acquisition of Bellamy helping milk powder business development; maintaining whole financial year’s guidelines October 23, 2019 473

PSR Recommendation: ACCUMULATE Status: Maintained
Target Price: HKDHKD34.60

Investment Summary
Mengniu announced that it intends to acquire Bellamy’s Australia at a price of no more
than AUD1.46 billion (HKD7.86 billion), with a planned share of AUD12.65 per share.
Bellamy’s net profit after tax is AUD21.7 million in FY2019. The P/E ratio is 67 times.
Bellamy is Australia’s first organic milk powder brand. It is listed on the ASX. It is a
global recognised brand and has operations in Australia, New Zealand, China and
Southeast Asia.We believe that the acquisition will be highly complementary to
Mengniu’s existing infant formula business, which will help Mengniu expand China and
overseas markets. Organic IMF enjoys significantly faster growth and higher margins
compared to the overall IMF market. Bellamy’s gross profit margin of FY 2019 reached
43.5%, and the EBITDA rate reached 17.6%, both higher than Mengniu. Bellamy’s FY
2018/2019 revenue fell 19% y.o.y. to AUD266 million, mainly due to the slower-thanexpected
approval of China’s milk powder formula registration, and the e-commerce law.
Mengniu said that after the acquisition, it will closely communicate with the relevant
departments to assist Bellamy to accelerate the registration approval.

About the author

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Tracy Ku
Investment Analyst

Graduated from Chinese University of Hong Kong, majoring in Economics for Bachelor Degree, and Journalism for Master Degree. Worked in financial news industry for more than four years.
Currently cover retailing, property sectors and IPOs. Good at analysis for the companies with economic policies and industry prospects.

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