Company Coverage
Inner Mongolia Yili Industrial Group (600887 CH): 2Q26: Revenue Misses But Operating Margin Expansion Better Than Expected; Reiterates Mid-Single-Digit Revenue Growth Target
BUY (Maintained)
Current price:
Target price:
Upside:
Rmb26.45
Rmb32.40
+22.5%
Analyst
Analyst
Highlights
- Yili’s 2Q26 revenue missed forecasts, but operating margin expansion was better than expected. The net profit decline was driven by impairment losses related with Ausnutria. We estimate that excluding the Ausnutria impact, core net profit increased 3% in 1H26 but decreased 15% in 2Q26, due to an income tax adjustment payment.
- Management has reiterated its full-year revenue target of mid-single-digits. Looking beyond, for the liquid milk business, it aims for accelerated growth in the future (earliest by 2027, per our understanding). Ausnutria is expected to turn profitable in 2H26.
Maintain BUY and keep target price unchanged at Rmb32.40.
Analysis
- 2Q26 revenue missed; operating margin expansion better than expected; net profit declined due to one-offs. In 1H26, Inner Mongolia Yili Industrial Group’s (Yili) revenue was Rmb64,490m, up 4% yoy but 3% below VA consensus. Operational gross margin was 36.4%, up 0.4ppt yoy. EBIT totalled Rmb8,830m, up 11% yoy, with EBIT margin at 13.7%, up 0.8ppt yoy. Net profit was Rmb5,759m, down 20% yoy. The decline in net profit was primarily attributed to: a) a Rmb1,547m goodwill impairment on Ausnutria (none in 1H25); b) a Rmb908m inventory impairment loss, most of which came from Ausnutria Dairy (vs Rmb316m in 1H25); and c) higher income tax, with the effective income tax rate rising to 24.5% in 1H26 from 12.6% in 1H25, due to an income tax adjustment payment. Net margin was 8.9%, down 2.7ppt yoy. Excluding the impairment losses related with Ausnutria, we estimate that core net profit increased by 3% in 1H26.
Highlights
- Yili’s 2Q26 revenue missed forecasts, but operating margin expansion was better than expected. The net profit decline was driven by impairment losses related with Ausnutria. We estimate that excluding the Ausnutria impact, core net profit increased 3% in 1H26 but decreased 15% in 2Q26, due to an income tax adjustment payment.
- Management has reiterated its full-year revenue target of mid-single-digits. Looking beyond, for the liquid milk business, it aims for accelerated growth in the future (earliest by 2027, per our understanding). Ausnutria is expected to turn profitable in 2H26.
Maintain BUY and keep target price unchanged at Rmb32.40.
Analysis
- 2Q26 revenue missed; operating margin expansion better than expected; net profit declined due to one-offs. In 1H26, Inner Mongolia Yili Industrial Group’s (Yili) revenue was Rmb64,490m, up 4% yoy but 3% below VA consensus. Operational gross margin was 36.4%, up 0.4ppt yoy. EBIT totalled Rmb8,830m, up 11% yoy, with EBIT margin at 13.7%, up 0.8ppt yoy. Net profit was Rmb5,759m, down 20% yoy. The decline in net profit was primarily attributed to: a) a Rmb1,547m goodwill impairment on Ausnutria (none in 1H25); b) a Rmb908m inventory impairment loss, most of which came from Ausnutria Dairy (vs Rmb316m in 1H25); and c) higher income tax, with the effective income tax rate rising to 24.5% in 1H26 from 12.6% in 1H25, due to an income tax adjustment payment. Net margin was 8.9%, down 2.7ppt yoy. Excluding the impairment losses related with Ausnutria, we estimate that core net profit increased by 3% in 1H26.
BUY (Maintained)
Current price:
Target price:
Upside:
Rmb26.45
Rmb32.40
+22.5%
Analyst
Analyst
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