Click to read the original article for details. After Junlebao goes solo, Mengniu's 'Double 100 Billion' goal faces more uncertainty. On July 1, Mengniu sold all its shares in Junlebao for 4.011 billion yuan in cash. This sale may cost Mengniu nearly 20% of its operating revenue and could create a new competitor. Will this turn Mengniu's 'Double 100 Billion' goal into empty talk? Selling the nine-year 'adopted son' for 4 billion: Does it align with company strategy? On the evening of July 1, Mengniu Dairy (hereinafter referred to as 'Mengniu') announced that it would sell its entire 51% stake in Shijiazhuang Junlebao Dairy Co., Ltd. (hereinafter referred to as 'Junlebao') for a total consideration of 4.011 billion yuan in cash. After the transaction, Mengniu will no longer hold any equity in Junlebao, ending their nine-year cooperative relationship, and Junlebao will operate independently. Junlebao came under Mengniu's umbrella in 2010, when Mengniu purchased a 51% stake for 469 million yuan, becoming its parent. Nine years later, Mengniu sold it for 4.011 billion yuan in cash, which many consider a profitable investment. However, Junlebao has been performing well, with a net profit of 307 million yuan in 2018, contributing nearly 10% of Mengniu's net profit. It is estimated that Junlebao's sales in 2019 could reach 15 billion yuan, with steady profit growth. Why would Mengniu give up such a high-quality asset? In response, a Mengniu spokesperson said: 'The transfer of Junlebao's shares aligns with our strategy of focusing on star dairy products and is in the overall interests of the company and shareholders.' However, many investors have questioned this response. The former 'adopted son' may become a new 'rival' During its nine years as a Mengniu subsidiary, Junlebao's revenue crossed from 1 billion yuan to over 10 billion yuan. Moreover, Junlebao has a strong position in the low-temperature yogurt market, with its series of yogurt products ranking fourth nationally in market share. In addition to maintaining low-temperature yogurt as its core strategy, Junlebao entered the infant formula market in 2014 through market segmentation. According to data disclosed by Junlebao, its milk powder sales exceeded 46,000 tons in 2018, with sales revenue growing over 100% year-on-year. Junlebao's strength is no longer what it used to be. It is reported that during its time as a subsidiary, to avoid competition with Mengniu, Junlebao's business scope was limited, mainly focusing on yogurt and milk powder. After breaking away, Junlebao will have independent operational rights, can enter more sub-categories, and may even list separately. Additionally, as a local growth enterprise, Junlebao carries the task of revitalizing the regional dairy industry and has strong support from the local government. In summary, during the cooperation, product categories were unified. After separation, both parties are likely to expand into each other's blank areas, and once product categories overlap, competition will arise, turning former 'close relatives' into 'rivals'. 'Double 100 Billion' goal may become a question mark In 2017, Mengniu proposed the 'Double 100 Billion' goal: to achieve sales and market value of 100 billion yuan by 2020. According to Mengniu's 2018 financial report, annual revenue was 68.977 billion yuan. As of July 16 this year, Mengniu's market value was 123.634 billion Hong Kong dollars, equivalent to 108.785 billion yuan, already exceeding 100 billion yuan. However, sales were only 68.977 billion yuan, still over 30 billion yuan short of the target. Even if we calculate based on the 14.66% year-on-year growth rate of total operating revenue in 2018, by 2020 total operating revenue would only reach 90.683 billion yuan, clearly failing to achieve the 100 billion yuan target. On the other hand, Junlebao's sales in 2018 reached 13 billion yuan, accounting for 18.8% of Mengniu's total operating revenue. Industry experts predict that Junlebao's revenue could reach 15 billion yuan in 2019 and 20 billion yuan in 2020. However, this revenue will no longer contribute to Mengniu. Overall, based on Mengniu's 2018 revenue growth rate, it is clearly unable to achieve the 100 billion yuan revenue target. At the same time, cutting off Junlebao will reduce Mengniu's revenue by nearly 20%; on the other hand, after Junlebao goes solo, its future product categories will overlap with Mengniu's, competing for market share. Mengniu's 'Double 100 Billion' goal faces more uncertainty. New $500 million bond issuance may signal major moves On July 12, Mengniu announced plans to issue $500 million in bonds, raising approximately 3.439 billion yuan. Additionally, with a net profit of 3.204 billion yuan last year and the expected 3.429 billion yuan from the Junlebao sale, Mengniu will have over 10 billion yuan in hand. At a critical time for the 'Double 100 Billion' goal, what will Mengniu do with such a large amount of capital? Various signs indicate that after setting the 'Double 100 Billion' goal, Mengniu began acquisition activities. It first acquired Modern Farming and China Shengmu, then cooperated with Zhongding United Dairy to develop small and medium-sized pastures. Next, will Mengniu, with 10 billion yuan in hand, continue expansion acquisitions? If so, will it favor domestic or overseas companies? Investor Network will continue to monitor its further moves. Source: Investor Network