China Mengniu Dairy Co (HK stock code: 2319) makes dairy products and ice cream in China, and is based in Inner Mongolia. It was founded in 1999 by Niu Gensheng, a former employee of Yili, another Inner Mongolian dairy group. In May 2013, a Danone Group joint venture said it would become a strategic investor in China Mengniu Dairy, with a stake of about four per cent.
“The gains are highly related to the election results and the peaceful weekend,” said Alan Li, portfolio manager at Atta Capital.
First-half net profit at China Mengniu Dairy jumped 16.3 per cent to 749.5 million yuan (HK$950 million) as demand for its products grew steadily.
The terms of a yogurt joint-venture between China Mengniu Dairy and Danone reflect the mistrust between two parties, analysts say. Hong Kong-listed Mengniu and Danone, a Paris-listed conglomerate, describe the details as legal formalities.
The recent decisions by China Mengniu to take over or partner with domestic and foreign dairy companies is a welcome move by one of the country's industry leaders to consolidate in a sector that has yet to recover fully from the 2008 scandal over melamine-adulterated milk.
China Mengniu Dairy soared to the highest level in more than five years after the country's largest dairy producer offered HK$12.5 billion to buy a mainland maker of infant formula.
Trading in the shares of two Hong Kong-listed mainland dairy firms, China Mengniu Dairy and Yashili International, was suspended yesterday, triggering market speculation about a possible consolidation in the fragmented formula milk market in China.
Shares in China Mengniu jumped more than 10 per cent yesterday after the company said it will introduce the French dairy-foods maker Danone as a strategic shareholder, with the two firms agreeing to set up a yogurt joint venture.
China Mengniu Dairy, the country's largest manufacturer of liquid dairy products, plans to pay HK$3.18 billion to dramatically boost its stake in China Modern Dairy, in an attempt to get a tighter hold of its raw milk supply.
The Inner Mongolia-based company said in an analysts conference yesterday that its revenue had grown year on year since January this year. Gross profit margin is also expected to improve thanks to the launch of new products, better cost control and a rise in retail prices.