HAITONG INT'L: Initiates WANT WANT CHINA (00151) with a "buy" rating, target price of 5.76 Hong Kong dollars.

HAITONG INT'L releases a research report indicating that it is expected that the revenue of WANT WANT CHINA (00151) will be 24.05/24.65/25.27 billion yuan for FY2025-2027, with a year-on-year growth of 2.3%/2.5%/2.5%; net profit attributable to the parent company will be 4.17/4.41/4.61 billion yuan, with year-on-year changes of -3.8%/+5.7%/+4.6%, corresponding to EPS of 0.35/0.37/0.39 yuan. With reference to the valuation of comparable companies, the company is given a 15x PE for FY2025 (ending March 2026 fiscal year), corresponding to a target price of 5.76 Hong Kong dollars, with a 15% upside potential (based on the closing price on December 24, 2025), initiating coverage with a "Buy" rating. HAITONG INT'L main points are as follows: The food and beverage industry has a multi-track layout, and comprehensive marketing continues to enhance brand strength. After more than sixty years of development, WANT WANT CHINA has become a nationally renowned food and beverage leading company, with business covering multiple tracks such as rice cakes, milk drinks, and snacks. The company has a concentrated shareholding structure and stable internal governance, with most senior executives having rich industry experience. Want Want actively carries out comprehensive marketing, greatly enhancing brand awareness through designing ad slogans and creating brand IPs, making Want Want a well-known national brand. The pillar business of milk drinks steadily expands capacity, new products and new channels drive the recovery of rice cakes, emerging channels and markets drive growth. The milk drinks category, which contributes more than half of the revenue, has a FY18-24 CAGR of approximately 3.7%. Milk drinks have both dairy and soft drink attributes, and in recent years have benefited from steady growth in consumer demand for flavors. The neutral milk drinks category to which the popular product Wangzai milk belongs has good prospects and relatively low competition. The company expects milk drink revenue to grow by 0.5%/2%/2% in FY25-27. The new products account for a double-digit percentage of rice cake revenue in FY25H1, and under the drive of new channels and new products, it is expected to further recover growth by 3.5%/2%/2% in FY25-27. Candy revenue in the snack food category has maintained good growth, and the company expects snack food revenue to grow by 5%/4%/4% in FY25-27. The company actively seeks breakthroughs through organizational restructuring, expanding emerging channels, and focusing on overseas markets. Despite pressure on traditional channels, snack volume retailers, platforms and content e-commerce, instant retail, and OEM channel development are strong. Additionally, the Asian market benefits from the high-speed growth of candy and pastries, with non-traditional channel revenue accounting for approximately 35% in 25H1, up from less than 10% in 21H1. Emerging channels and markets are expected to continue to support revenue growth. Control of raw material costs + continuous optimization of operational efficiency, profitability expected to rebound after short-term pressure. The company's gross profit margin has improved somewhat in FY23-24 due to cost reductions. The company will use measures such as domestic substitution to deal with the increase in the price of imported milk powder, while other major raw material costs are generally controllable. In addition, the company has strengthened control over channel costs in recent years and optimized warehouse and logistics investment. Although the cost rate is temporarily under pressure due to the organizational structure optimization in FY24H2, the operating profit margin of various categories is expected to rebound after short-term pressure. The overall EBIT margin is expected to be 23.8%/23.9%/24.1% in FY25-27. Risk factors: Intensified industry competition, fluctuating raw material prices, food safety risks.