We initiate coverage on Bright Dairy with an OUTPERFORM rating. Bright is the largest dairy company in Shanghai (above 50% share), the third-largest dairy company in China (an 8% share). We forecast Bright's earnings will see a 46% CAGR over 2014-16, on a sales CAGR of 14%. Full report Bright created Mosilian, a UHT yoghurt product in 2009. It has chilled yoghurt texture, offers certain nutrition, requires no cold-chain support, and enjoys a 40-50% gross margin. We forecast its sales to grow 27% CAGR over 2014-16 (36% of sales and 45% segment share in 2016) and drive margin expansion. We believe the popularity of Mosilian would help Bright expand out of East China (60%/70% sales/earnings). It added 500k new POS in 2014, lifting total POS count to 700k from 200k in 2013. Our target price of Rmb24 is based on 36x 2015E P/E (implying 0.8x PEG). This compares with: (1) our target 24x P/E and 1.2x PEG for Yili, (2) target 25.5x P/E and 1.2x PEG for Mengniu, and (3) trading 1.5-2x PEG for Tingyi, Hengan, WW, Sunart, and TT.