UBS: Lowers WANT WANT CHINA (00151) target price to 5.6 Hong Kong dollars. Increased advertising expenses are dragging down first-half profits.

UBS releases research report, stating a 9% and 8% decrease in net profit forecast for WANT WANT CHINA (00151) for the 2026 and 2027 fiscal years, respectively; It is expected that the full-year revenue and net profit for the 2026 fiscal year will increase by 2% and decrease by 9% respectively, with a 2% increase and a 10% decrease in the second half of the 2026 fiscal year. The target price has been reduced from HK$6 to HK$5.6, maintaining a "buy" rating. For the first half of the 2026 fiscal year of WANT WANT CHINA (ending in September this year), revenue increased by 2.1% to 11 billion yuan, while net profit decreased by 7.8% to 1.7 billion yuan; The gross profit margin decreased by 1.1 percentage points to 46.2% year-on-year, and the net profit margin decreased by 1.7 percentage points to 15.5%. The bank believes that revenue met expectations but profits were below market expectations, mainly due to a 10.6% increase in operating expenses year-on-year, including an increase in advertising and promotional expenses. The management of Want Want revealed that the sales performance in October and November this year was worse than last year, mainly due to the later Lunar New Year in 2026. In terms of profit margins, management expects the gross profit margin in the second half of the year to remain stable compared to the first half, with improvements expected next year as the cost of imported milk powder gradually decreases from its current high level; In the long term, the ratio of advertising and promotional expenses will remain at a level of 3 to 4%.