Highlights

• Yili’s 3Q26 revenue grew 2% yoy, missing expectations. However, core operating profit increased 7% yoy, with core operating margin expanding 0.5ppt yoy. Net profit declined 6% due to higher impairment losses, lower fair value gains and a higher effective tax rate. 
   
• With distributor inventory improving and a low base, management expects the liquid milk business’ growth to accelerate in 4Q26. Management reiterated its full-year target of mid-single-digit revenue growth, with core operating margin improving yoy. Maintain BUY; raise target price by 4% to Rmb33.70.
   

Analysis

• 3Q26 revenue missed but operating margin expansion continued; net profit declined 6% on non-operating items and higher income taxes. Inner Mongolia Yili Industrial Group (Yili) reported its 9M26 results. In 9M26, revenue was Rmb93,813m, up 4% yoy. Operational gross margin was 35.8%, up 0.5ppt yoy. EBIT rose 10% yoy to Rmb12,107m, with EBIT margin increasing 0.8ppt yoy to 12.9%. Core operating profit increased 9% yoy to Rmb11,400m, with core operating margin expanding 0.6ppt yoy to 12.3%. Net profit was Rmb8,804m, down 16% yoy, with net margin dropping 2.1ppt yoy to 9.4%.