ConsumerDaily Briefs

Consumer: China Youran Dairy Group Ltd, Kao Corp, Discovery, Inc., Galaxy Entertainment Group, Tata Motors Ltd, Mahindra & Mahindra, Rupa & Company, Bharat Forge and more

In today’s briefing:

  • China Youran Dairy(悠然牧业) IPO – Reasonable Valuation but There Will Be Significant Overhang
  • China Youran Dairy Group IPO: Valuation Insights
  • Priced At a Premium, But Preferred Over Peers As a Thematic Investment
  • China’s Three Child Policy Beneficiaries Part 2 Kao Corporation: Finally Off The Leash?
  • MergerTalk: Why Market Apathy To Discovery’s Merger With WarnerMedia Is A Gift To Value Investors
  • Interminable Delays in Japan Casinos Have Reduced Cannibalization Threat to Macau’s Long Term Growth
  • Pick of the Week – Tata Motors Limited
  • Autos: Into the twilight zone; single digit growth ahead
  • RUPA: Focus on newer products, markets to aid revenue growth FY21 has been a good year for Rupa w…
  • BHARATFORG: BFL said: (i) cost pressure exists on raw material and freight costs (up 3-4x in the …

China Youran Dairy(悠然牧业) IPO – Reasonable Valuation but There Will Be Significant Overhang

By Zhen Zhou, Toh

China Youran Dairy Group Ltd (1836774D CH) is looking to raise up to US$799m in its upcoming Hong Kong IPO. 

CYD is an integrated provider of products and services in the upstream dairy industry. The company is a leader in the various upstream industries that it operates in even though they are mostly fragmented.

In this note, we will share our forecast and assumptions and discuss valuation and other deal dynamics of the IPO.

We have previously covered the IPO in:


China Youran Dairy Group IPO: Valuation Insights

By Arun George

China Youran Dairy Group Ltd (9858 HK) is the world’s largest raw milk provider as measured by herd size of dairy cows as of 30 June 2020 and raw milk production volume in 1H20, according to Frost & Sullivan. Youran was once a wholly-owned subsidiary of Inner Mongolia Yili Industrial Group (A) (600887 CH) until PAG Capital’s investment in 2015.

At the proposed IPO price range of HK$6.98-8.66 per share, Youran will have a market cap of HK$26,492-32,868 million ($3.4-4.2 billion). At the mid-point of the IPO price range, the gross proceeds are HK$5,595 million ($722 million). The primary/secondary split is 69%/31%. The selling shareholder is PAG Capital.

The cornerstone support is unusually low. Two cornerstone investors will purchase $50 million worth of the offer shares (6.94% of the offer shares at the mid-point of the IPO price range). The cornerstone investors are CITIC-Prudential Life Insurance and Harvest Fund Management.

In China Youran Dairy Group IPO Initiation: Ecownomics, we stated that notwithstanding its high revenue dependence on Yili, Youran is capitalising on the favourable demand-supply imbalance for raw milk in China by delivering strong organic growth (on a pro-forma basis), rising margins and accretive acquisitions. We concluded that Youran is worth a look.

Based on our forecasts, Youran is attractively valued to its H-share peer group, which are largely downstream players, at the low-end of the IPO price range. Compared to China Modern Dairy (1117 HK), an upstream dairy peer (arguably the key listed comp), Youran trades at a substantial premium on a CY2021 P/E basis but trades at a substantial discount on a CY2021 PEG basis. Overall, we are inclined to participate at most at the low end of the IPO price range due to the decent upside potential. 


Priced At a Premium, But Preferred Over Peers As a Thematic Investment

By Oshadhi Kumarasiri

China Youran Dairy Group Ltd (9858 HK) announced the indicative price range to its IPO on 7th June 2021 at HK$6.98-8.66 per share, which implies a market cap and EV range of HK$26.5-32.9bn and HK$34.0-39.6bn respectively.

At 9.5x implied 2022 EV/EBIT, Youran is priced at a 34% premium to its closest competitor China Modern Dairy (1117 HK). However, we still prefer Youran over China Modern as a thematic pick based on China’s upstream dairy market consolidation trend.


China’s Three Child Policy Beneficiaries Part 2 Kao Corporation: Finally Off The Leash?

By Oshadhi Kumarasiri

China has announced that it will allow couples to have up to three children, after census data showed a steep decline in birth rates. Previously, we analysed the possible impact on the Japanese baby and childcare company Pigeon Corp (7956 JP) as a result of the above policy shift. This time around, we analyse the impact on the Japanese personal care company Kao Corp (4452 JP), whose share price rose 1.5% in the last two trading days.


MergerTalk: Why Market Apathy To Discovery’s Merger With WarnerMedia Is A Gift To Value Investors

By Robert Sassoon

We believe that the proposed merger of At&T Inc (T US) ‘s  media assets with Discovery, Inc. (DISCA, DISCK, DISCB US)  via a Reverse Morris Trust transaction promises to unlock substantial value for Discovery shareholders. Our insight discusses why the transaction has been beset by investor apathy, why we think this creates an excellent value creating opportunity and how best to take advantage of the opportunity.


Interminable Delays in Japan Casinos Have Reduced Cannibalization Threat to Macau’s Long Term Growth

By Howard J Klein

  • The passage of Japan Integrated Casino Resort legislation in 2016 initially targeted the 2020 Olympics for launch of properties. Now, even 2027/29 is earliest feasible debut.
  • The projected US$25b Japan marker would have cannibalized existing Macau revenues considering that pre-pandemic, Japan welcomed 9.5m Chinese tourists–without casinos.
  • Macau operators have an ongoingUS$8.5b investment in expansion there. A possible opening of Japan in the originally envisioned years is no longer operative.

Pick of the Week – Tata Motors Limited

By Edelweiss

Tata Motors is India’s largest commercial vehicle company and fourth-largest PV player.

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Autos: Into the twilight zone; single digit growth ahead

By HDFC Securities

Based on our assessment, replacement sales will account for ~50% (half) of total sales as penetration has already risen to quite an extent, particularly in north India. After having witnessed 10% CAGR in the past 15+ years, we believe that tractors growth will moderate to 5-6% over the next decade. Additionally, during this period, tractor penetration in the country increased to 45-50 tractors per 000 hectares, which is higher than the world average (~30). Meanwhile, Indias landholding remains highly fragmented, with 86% (majority) of the farmers owning under 2 hectares of land.

Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

RUPA: Focus on newer products, markets to aid revenue growth FY21 has been a good year for Rupa w…

By ICICI Securities Limited

Focus on newer products, markets to aid revenue growth FY21 has been a good year for Rupa with highest ever revenue and net profit with revenue growth of 35% to Rs 1313 crore and net profit of Rs 175 crore. To cater to latest customer demands, the company has added newer varieties under its existing brands. Also, it is focussing on enhancing its distribution reach both in existing and newer markets by appointing new distributors to garner a higher share of consumer demand for its product categories.

Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

BHARATFORG: BFL said: (i) cost pressure exists on raw material and freight costs (up 3-4x in the …

By ICICI Securities Limited

BFL said: (i) cost pressure exists on raw material and freight costs (up 3-4x in the recent past), (ii) BFL has recently won an order from Government of India in the defence domain (non-automotive) wherein BFL will start supplying components in a month’s timeframe (quantum not disclosed); (iii) BFL will be acquiring land to the tune of ~70 hectares at Khed (Maharashtra, near Pune) at an outlay of ~Rs 240 crore (over the next two to three years) wherein they intend to construct two new plants in the domain of e-mobility and defence.

Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

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