Morgan Stanley has issued a research report stating that it anticipates the share price of Mengniu Dairy (02319) will rise in absolute terms over the next 15 days, with an estimated probability for this scenario of approximately 70% to 80%, or "very likely."

The firm maintains its view that liquid milk sales will recover and grow by 2026, projecting overall sales to increase by 5.5%. At present, Mengniu's price-to-earnings ratio based on the firm's 2026 forecast is around 11.2 times, which is deemed attractive.

The bank has reiterated an "Overweight" rating with a target price of HK$20.

It was noted that a recent pullback in Mengniu's share price has made its short-term valuation more appealing.

While the market had expressed concerns about a potential weakening in its near-term sales trends, the firm believes the year-to-date trend remains consistent with the company's goal of stabilizing its UHT milk business and achieving growth, with other product categories growing at a faster pace.

Morgan Stanley added that due to calendar effects—the 2025 Dragon Boat Festival falling on May 31 versus June 19 in 2026—and a high base from a price adjustment for the Telunsu product in May 2025, May 2026 will face an unfavorable comparative base.

However, the firm's channel checks indicate that liquid milk still recorded positive growth in May, albeit at a slower pace compared to April due to the high base effect.