As a result of the shift in the expected Genus PIC mix towards royalty contracts and persistent dairy market weakness, we have lowered our revenue forecasts for FY2016-18. We have also increased forecast R&D expenditure and reduced margin expectations in Genus ABS to reflect the weak dairy market conditions: we note that the US dairy farming industry is forecast to incur losses through the remainder of this calendar year. However, trading in Genus PIC remains strong and we have increased our medium term forecasts for Genus Asia, especially China where porcine profitability improved sharply in H1. Our recommendation remains Hold with a revised target price of 1,429p (from 1,442p).
