Yili's Q3 Earnings Exceed Expectations Despite Revenue Miss

While the growth momentum for liquid milk accelerated due to increased gifting demand, the company expressed caution regarding the fourth-quarter trend, citing a high base from the previous year.

Although premium liquid milk revenue growth outpaced that of mass-market milk and yogurt, the management remains cautious about the fourth quarter's outlook. The milk powder business faced challenges, but Yili recorded positive sales growth in October, thanks to new product launches.

Despite a slightly lowered 2023 revenue growth projection to 3.9% year on year, below management guidance, the company's competitive advantage in distribution remains strong. The fair value estimate stands at CNY 40 per share, implying 24 times 2023 price/earnings, and shares are considered undervalued. While the quarterly results were positive, the fourth-quarter trend may soften, reflecting a modest recovery in consumer sentiment.