WANT WANT CHINA(00151) 海通证券·2024-07-02 08:01Investment Rating - The report maintains an "Outperform" rating for China Want Want (0151 HK) [3] Core Views - Revenue growth is steady with significant improvement in gross margin driving strong net profit performance [3] - Dairy beverages emerging channels and overseas markets show good performance with notable profitability improvement [3] - Traditional channels are recovering while emerging channels and overseas markets are important growth drivers [5] - The company is expected to maintain a positive trend in FY2024 with further improvement in dairy and beverage gross margins [5] Financial Performance - FY2023 revenue reached 23 586 billion yuan (YoY +2 9%) with net profit attributable to shareholders of 3 990 billion yuan (YoY +18 4%) [1] - Gross margin increased by 2 67pct to 46 60% in FY2023 [3] - Net profit margin rose by 2 21pct with net profit attributable to shareholders growing 18 36% YoY [3] - The company plans to distribute cash dividends of 2 776 billion yuan with a payout ratio of 69 57% [1] Business Segments - Dairy and beverage category revenue grew 7 4% YoY with gross margin improving by 3 7pct to 48 5% [2] - Rice cracker category revenue increased 2 3% YoY with gross margin up 3 4pct to 46 0% [3] - Snack food category revenue declined 5 5% YoY but gross margin improved by 0 6pct to 44 0% [3] Channel Performance - Traditional channels showed recovery with milk category growing high single-digit and beverage category growing double-digit [5] - Modern channels grew low-to-mid single-digit with significant growth in dairy and beverage categories [5] - Emerging channels maintained high single-digit growth becoming an important growth driver [5] - Overseas revenue achieved mid-to-high double-digit growth with significant progress in candy products [5] Future Outlook - FY2024-2026 revenue is projected to be 249 92/259 26/268 37 billion yuan [5] - Net profit attributable to shareholders is expected to be 4 554/4 878/5 210 billion yuan for FY2024-2026 [5] - EPS is forecasted to be 0 39/0 41/0 44 yuan per share for FY2024-2026 [5] - The company is given a PE valuation range of 16-20x (2024E) corresponding to a reasonable value range of 6 93-8 67 HKD per share [5] Financial Ratios - ROE improved from 23 01% in FY2022 to 24 38% in FY2023 and is expected to reach 26 02% by FY2026 [4] - Asset-liability ratio decreased from 40 25% in FY2023 and is projected to further decline to 35 62% by FY2026 [8] - Current ratio improved from 1 56 in FY2023 and is expected to reach 2 06 by FY2026 [8]