Haitong: U-PRESID CHINA (00220) has been given a "outperform" rating by us with a fair value of 8-10 Hong Kong dollars.

Haitong released a research report stating that U-PRESID CHINA (00220) is rated as "outperform the market", with projected total operating revenue of 31.087/32.891/34.632 billion yuan for 2024-2026, main operating revenue of 30.858/32.662/34.403 billion yuan, and net profit attributable to the mother of 1.925/2.179/2.452 billion yuan, with a reasonable value range of 8-10 Hong Kong dollars. The bank believes that with the upcoming peak season of Spring Festival consumption and the continuous contribution of the company's diversified channel development, it is optimistic about the company's beverage business continuing to maintain rapid growth in the fourth quarter. Event: On November 12, 2024, the company disclosed the announcement of "Unaudited Financial Data", with a net profit after tax of 1.636 billion yuan for the first three quarters of 2024 (as of September 30, 2024). Haitong's main points are as follows: The level of net profit in the first three quarters reached a new high, and the net profit continued to maintain year-on-year steady growth against the background of rising palm oil prices in the single third quarter. Referring to the unaudited financial data disclosed by the company on November 9, 2023, the company achieved a net profit after tax of 1.467 billion yuan in the first three quarters of 2023. Therefore, the company's profit for the first three quarters of 2024 increased by 11.49% year-on-year, and the net profit after tax in the first three quarters reached a new high in history. In addition, considering that the other operating net income in the first half of 2023 reached 371 million yuan (only about 42.71 million yuan in the first half of 2024), excluding this impact, the net profit after tax in the first three quarters increased by over 45% year-on-year. Looking at the single third quarter, the company achieved a net profit after tax of 670 million yuan in 24Q3 (YOY13.45%), a 31.68% increase from 24Q2. According to Wind, the DCE palm oil index average price in 24Q3 increased by 4.46% compared to 23Q3, so in the context of a significant increase in palm oil prices in the single third quarter, the company continued to maintain steady profit growth. The performance of tea beverages is impressive, and Haizhiyan continues to enhance its growth momentum. In the first half of 2024, the company focused on cultivating market channels, covering multiple consumption scenarios, including traditional on-the-go scenarios, and continuously exploring dining, home, gift, and group buying scenarios. It also promoted the expansion layout of high-performance terminal sales points, continued to invest in frozen products, and empowered digitization. In addition, the company has launched a dual product line of low-sugar and sugar-free products to cater to the new trend of healthy consumption, with the introduction of a new sugar-free product "Chun Fu Green Tea" priced at 4 yuan. In H1 2024, the company's beverage business achieved a revenue of 10.024 billion yuan (YOY 8.3%). Risk warning: (1) Decline in market demand, (2) Product promotion falling short of expectations, (3) Fluctuations in raw material prices, (4) Food safety issues.