China Feihe (6186 HK) Company Update Summary
Core Content
China Feihe (6186 HK) is a company in the food and beverages sector, and this report provides an equity research update from CMB International Global Markets. The company is currently rated BUY with a target price of HK$7.5, which is +25.6% above the current price of HK$5.9. The report outlines the company's financial performance, market dynamics, and valuation analysis.
Main Points
2023 Outlook
- Management expects double-digit growth in both revenue and net profits for 2023.
- Despite channel reforms, competition remains intense, especially in the infant formula milk (IMF) segment.
- Yili's aggressive entry into the IMF segment, following its acquisition of Ausnutria, is expected to take market share from existing players, especially the leading one, due to a zero-sum game scenario with low birth rates.
- The company's growth in 2023 is primarily driven by an easy comp rather than a recovery in birth rates.
- The birth rate is expected to start improving earliest by 2024E, which is the base case.
Dividend Yield
- The company is targeting a 10% annual increase in absolute dividend payments.
- A 5% forward dividend yield is highlighted as attractive, especially given the company's ample cash position.
Earnings Forecast
- The report maintains revenue assumptions for 2023-2024E.
- Net profit estimates are revised downward by 6% and 14% due to a ~3pp lower gross margin.
- The company is 10-15% below the consensus in earnings estimates.
Valuation
- The new target price (TP) is based on an 11.0x P/E multiple, which is -1 standard deviation below the long-term average.
- The intensifying competition in the IMF segment is a key factor in the valuation adjustment.
Financial Summary
Income Statement (RMB mn)
| Year |
Revenue |
IMF |
Others |
Gross Profits |
EBIT |
Net Profit |
| FY20A |
18,592 |
17,674 |
919 |
13,480 |
9,844 |
7,437 |
| FY21A |
22,776 |
21,364 |
1,412 |
16,008 |
9,844 |
6,871 |
| FY22E |
21,311 |
19,956 |
1,355 |
13,951 |
6,987 |
4,942 |
| FY23E |
23,087 |
21,683 |
1,404 |
14,571 |
7,100 |
5,317 |
| FY24E |
26,560 |
25,105 |
1,455 |
16,517 |
8,072 |
6,039 |
Cash Flow Summary (RMB mn)
| Year |
Net Income |
D&A |
Change in Working Capital |
Net Cash from Operating Activities |
Capex & Investments |
Net Cash from Investing Activities |
Net Cash from Financing Activities |
Net Change in Cash |
| FY20A |
7,437 |
266 |
1,253 |
7,751 |
(816) |
(3,786) |
(2,543) |
1,421 |
| FY21A |
6,871 |
443 |
(827) |
6,815 |
(1,930) |
(2,444) |
(4,245) |
125 |
| FY22E |
4,942 |
510 |
822 |
5,966 |
(2,023) |
(2,489) |
(3,771) |
(293) |
| FY23E |
5,317 |
601 |
(483) |
5,456 |
(1,748) |
(2,199) |
(1,839) |
1,418 |
| FY24E |
6,039 |
684 |
(190) |
6,555 |
(1,742) |
(1,742) |
(2,814) |
1,998 |
Balance Sheet (RMB mn)
| Year |
Non-Current Assets |
Current Assets |
Total Net Assets |
Shareholders' Equity |
| FY20A |
9,778 |
18,544 |
19,186 |
17,747 |
| FY21A |
11,512 |
19,970 |
22,403 |
20,921 |
| FY22E |
13,286 |
22,230 |
25,475 |
23,986 |
| FY23E |
14,869 |
23,990 |
29,059 |
27,564 |
| FY24E |
15,912 |
26,472 |
32,290 |
30,789 |
Key Ratios
| Year |
IMF Sales Mix (%) |
Gross Margin (%) |
Operating Margin (%) |
Net Margin (%) |
ROE (%) |
Dividend Yield (%) |
| FY20A |
95.1 |
72.5 |
52.9 |
40.0 |
25.1 |
n.a |
| FY21A |
95.9 |
70.3 |
43.2 |
30.6 |
40.4 |
n.a |
| FY22E |
93.6 |
65.5 |
32.8 |
23.2 |
20.6 |
5.0 |
| FY23E |
93.9 |
63.1 |
30.8 |
23.0 |
19.3 |
5.4 |
| FY24E |
94.5 |
62.2 |
30.4 |
22.7 |
19.6 |
6.1 |
Summary of Earnings Revisions
| Metric |
New Estimate (RMB mn) |
Old Estimate (RMB mn) |
Diff (%) |
| Revenue |
23,087 |
22,847 |
+1.1% |
| Gross Profit |
14,571 |
15,286 |
-4.7% |
| EBIT |
7,100 |
8,233 |
-13.8% |
| Net Profit |
5,317 |
5,720 |
-15.7% |
Market and Share Performance
- Market Cap: HK$54,137 million
- Avg 3 mths t/o: HK$142.3 million
- 52w High/Low: HK$9.2 / HK$4.5
- Total Issued Shares: 9,068 million
Share Performance
| Period |
Absolute |
Relative |
| 1-mth |
-4.8% |
-9.0% |
| 3-mth |
-10.1% |
-12.4% |
| 6-mth |
8.5% |
-6.8% |
Analyst Certification and Ratings
- The analyst certifies that the views expressed reflect their personal opinions and that no compensation is tied to the report's content.
- CMBIGM Ratings:
- BUY: Potential return of over 15% over next 12 months.
- OUTPERFORM: Industry expected to outperform the benchmark.
- MARKET-PERFORM: Industry expected to perform in-line with the benchmark.
Risk and Disclaimer
- The report contains general market information and is not tailored for individual investors.
- Past performance does not guarantee future results.
- No liability is accepted for any reliance on the report's information.
- The report is intended for specific investors and may not be distributed to others without consent.
- CMBIGM may have conflicts of interest and is not responsible for any resulting decisions.
Shareholding Structure
| Holder |
% Ownership |
| Garland Glory Holdings |
43.6% |
| Morgan Stanley |
7.8% |
| Dasheng Ltd |
4.5% |
