[ET Net News Agency, 17 June 2020] Citi Research cut its target price for Want Want
China (00151) to HK$8.69 from HK$8.94 and maintained its "buy" rating, given relatively
low market expectations on the stock & its quicker-than-expected sales recovery in
April-May.
The research house said Want Want's rice cracker sales in 1Q CY2020 largely completed
before the Chinese New Year (CNY)(25 January) and were not significantly impacted by
COVID-19. Different from Mengniu's (02319) Milk Deluxe & Yili's Satine Milk, Want Want's
Hot-kid Milk sales are not seasonably skewed towards CNY for gifting, with much less
channel inventory pressure than Mengniu & Yili in 2Q CY2020 post-COVID.
Citi said only Want Want's popsicle sales in the snack segment were substantially
affected by the pandemic but some revenues were actually shifted from February-March to
April-May. Therefore, its group sales quickly returned to double-digit growth in April-May
without pronounced promotions (versus 20%+ decline in February-March), given its no
significant channel inventory pressure and quickly restored the confidence of distributors
(thanks to its proactive incentives and financing solutions).
Citi lowered its FY2021/22 earnings forecasts by 10%/11%. (KL)