20201120-招银国际-中国旺旺-00151.HK-GPM_to_stabilize_in_2HFY21E_6页_1012kb

Want Want (151 HK) Company Update Summary

Core Content Overview

This document provides an equity research update on Want Want (151 HK) by CMB International Securities. The report discusses the company's performance in the first half of FY21 (1HFY21), its outlook for the second half (2HFY21E), and financial forecasts for FY21 through FY23. It also includes key financial metrics, valuation analysis, and risk factors.

Key Financial Highlights

Revenue and Net Profit Growth

• 1HFY21 Revenue: RMB 10,299 million, up 11% YoY, surpassing the consensus by 2%.
• 1HFY21 Net Profit: RMB 1,952 million, up 21% YoY.
• EPS (RMB): 0.16, up 21% YoY.

Profit Margins

• Gross Profit Margin (GPM): 48.2% in 1HFY21, down 0.7ppt due to rising milk powder and sugar prices.
• Operating Profit Margin: 24.6%, up 2.5ppt YoY.
• Net Profit Margin: 19.0%, up 1.6ppt YoY.

Cost and Expenses

• SG&A Expenses Ratio: 24.8%, down 3.7ppt YoY due to reduced headcount and social security expenses.
• A&P Expenses Ratio: 2.3%, down 1ppt YoY.
• Net Cash (RMB mn): Increased by 13% to RMB 7,121 million in 1HFY21.

Outlook and Valuation

GPM Stabilization

• Management expects GPM to stabilize in 2HFY21E, as milk powder and sugar prices are expected to soften.
• Emerging channels are expected to contribute to improved sales mix and help stabilize GPM.

Earnings Revisions

• FY21-23E Net Profit is revised upward by 1–2% due to better-than-expected sales performance.
• 2HFY21E Revenue Growth: Expected to be 11%, and NP Growth: 10%.
• NPM: Slight decrease of 0.2ppt due to increased SG&A expenses.

Valuation Metrics

• P/E Ratio (FY21E): 14.6x, at the low end of the 13–24x range since FY16.
• PEG Ratio (FY22E): 1.5x, lower than Dali's 2.0x, suggesting undemanding valuation.
• Dividend Yield: 5.5% in FY21E, up from 5.2% in FY20A.

Shareholder and Share Performance

• Tsai Eng-Meng holds 51.69% of shares.
• Share Performance:
  • 1-month: -0.7%
  • 3-months: -5.4%
  • 6-months: -0.2%
  • 12-months: Not specified in absolute terms, but shows negative performance relative to the market.

Catalysts and Risks

Catalysts

• Better-than-expected revenue and margins.
• Share purchases by the company or major shareholders.

Risks

• Keen competition.
• Food safety issues.
• Unfavorable raw material prices.

Target Price and Investment Recommendation

• Target Price (TP): HK$7.36, down from HK$7.80.
• Current Price: HK$5.67.
• TP Upside: +30% from current price.
• Investment Recommendation: Maintain BUY.

Financial Summary (FY19A to FY23E)

Revenue

• FY19A: 20,712 million RMB
• FY20A: 20,095 million RMB
• FY21E: 22,261 million RMB
• FY22E: 23,058 million RMB
• FY23E: 24,239 million RMB

Net Profit

• FY19A: 3,477 million RMB
• FY20A: 3,649 million RMB
• FY21E: 4,190 million RMB
• FY22E: 4,385 million RMB
• FY23E: 4,721 million RMB

EPS

• FY19A: 0.279
• FY20A: 0.294
• FY21E: 0.343
• FY22E: 0.359
• FY23E: 0.386

P/E Ratio

• FY19A: 17.4
• FY20A: 17.2
• FY21E: 14.6
• FY22E: 14.0
• FY23E: 13.0

Net Cash

• FY19A: 7,643 million RMB
• FY20A: 8,376 million RMB
• FY21E: 8,704 million RMB
• FY22E: 10,237 million RMB
• FY23E: 11,912 million RMB

Emerging Channels

• Emerging channels showed mid-to-high single-digit sales growth in 1HFY21.
• They contributed to the launch of new products and helped understand consumer behavior.
• Though currently lower margin, they are expected to accelerate revenue growth and improve GPM in the long term.

Share Buybacks and Shareholder Actions

• Share Buybacks in 2020: Total of 187.6 million shares, with an average price of HK$5.36.
• Share Purchases by Directors: 20.2 million shares, with an average price of HK$5.51.

Key Ratios

Sales Mix

• Rice Crackers: 26.9% in FY21E
• Dairy and Beverages: 47.9% in FY21E
• Snacks: 25.0% in FY21E

Profit Margins

• Gross Profit Margin: 48.2% in FY21E
• Operating Profit Margin: 24.8% in FY21E
• Net Profit Margin: 19.0% in FY21E

Payout Ratio

• FY21E: 80.0%

Balance Sheet Ratios

• Current Ratio: 3.6 in FY21E
• Asset Turnover: 0.7 in FY21E

Return Ratios

• ROAE: 27.6% in FY21E
• ROAA: 13.9% in FY21E

Conclusion

• The company is expected to maintain its BUY rating.
• Valuation is undemanding, with a low PEG and P/E ratio.
• Emerging channels are a key growth driver, with the potential to improve margins over time.
• Share buybacks and shareholder actions are positive catalysts.
• Risks include intense competition, food safety concerns, and raw material price volatility.