Daiwa Research lifted its target price for Want Want China (00151) to HK$9.2 from HK$8 and maintained its "underperform" rating.
The research house said Want Want's 1H FY2020 net profit grew by 18% to CNY1.63bn, beating Daiwa's expectation on a higher gross margin.
Daiwa revised its FY2020-22 revenue forecasts slightly on better ASP but worse volume assumptions. It also raised its FY2020-22 EPS estimates by 2-3% on higher gross margin assumptions.
Daiwa sees Want Want's valuation as attractive with an FCF (free cash flow) yield of 6% and its commitment to return FCF to shareholders via dividends and share buybacks, and its low capex needs.
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