This year, the stock price of Yili performed badly, dropped by more than 25% since beginning of 2018. In my opinion, there are several causes:
- Fierce competition: highly increased cost for advertisement, and the profit stays nearly flat.
- The internal management problems remains unsolved, and the investors worry about future development.
- Huge growth of the stock price last year makes it gravitate to the lower place.
In short term, market price may fluctuate and no one can predict accurately always. However, Yili is still one of my favorite company to invest in a long time in the future.
First, from diary industry perspective:
- People drink milk dated back to thousands years history, and it’s hard to change people drinking habit in the future;
- More and more people are pursuing healthy lifestyle after basic needs satisfied, which provides the driving force for the healthy food and diary industry growth;
- The average diary drinking level of per person in China is far less than the world level;
- With the development of China, government makes strict security rules for the food industry, in the mean time, fierce competition in the diary industry makes small and medium diary companies hard to live. In past several years, Yili is the number one in Chinese diary market, if Yili keeps the quality first principle, the competitors will hard to win more market share.