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<Research> UBS Lowers TP of CHINA FOODS (00506.HK) to HKD4.89, Maintains 'Buy' Rating
Recommend 4 Positive 1 Negative 2 |
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UBS released a research report stating that CHINA FOODS (00506.HK) saw its revenue grow by 2.7% year-on-year to RMB22.07 billion last year, benefiting from resilient sales of carbonated beverages, recovery in water business revenue, and strong growth in energy drinks, partially offset by a decline in juice revenue. The gross profit margin fell by 0.7 percentage points year-on-year to 37.1%, mainly due to an increased proportion of low-margin water products and rising aluminum can costs. Earnings before interest and taxes grew by 5.1% year-on-year to RMB1.925 billion, with net profit at RMB862 million, remaining largely flat due to higher tax rates, while the dividend payout ratio was maintained at 50%. The firm noted that driven by carbonated beverages, sales in the first two months recorded double-digit growth, indicating a strong start. PET costs have been locked in until the end of the third quarter, and carbonated beverages in aluminum cans, which account for 25% of revenue, saw a price increase in March, supporting the profit margin outlook. New channels such as vending machines, e-commerce, snack discount stores, and instant retail showed strong growth, with the company reducing channel conflicts through differentiated packaging. Management expects long-term profit margins to be driven by operational leverage rather than input costs. The firm stated that under the "15th Five-Year Plan," COFCO Group will promote a strategy of nutritional and healthy foods, with CHINA FOODS leveraging its direct-to-consumer model and approximately 130,000 vending machines and other proprietary channels to distribute non-cola products. Though the short-term profit impact is limited, it could become a growth driver in the long term. UBS slightly adjusted the earnings forecast for CHINA FOODS, lowering the target price from HKD5.07 to HKD4.89, while maintaining a 'Buy' rating. (ec/u) Auto-translated by third-party software This translation was auto-generated by third-party software. AASTOCKS.com Limited does not guarantee its accuracy or completeness and accepts no liability for any damages or losses arising from the use of this translation. More Details
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