UBS: Maintains "buy" rating for CHINA FOODS (00506) with target price adjusted to HK$4.89.

UBS released a research report stating that it maintains a "buy" rating for CHINA FOODS (00506), adjusting profit forecasts slightly, with a target price lowered from HK$5.07 to HK$4.89. The report states that CHINA FOODS' revenue last year increased by 2.7% year-on-year to RMB 22.07 billion, benefiting from resilient sales of carbonated beverages, a recovery in water business revenue, and strong growth in energy drinks, partially offset by a decline in fruit juice revenue. The gross profit margin fell by 0.7 percentage points to 37.1% year-on-year, mainly due to the increase in the proportion of low-margin water products and rising aluminum can costs. Profit before interest and taxes increased by 5.1% year-on-year to RMB 1.925 billion, with net profit at RMB 860 million, staying relatively flat, mainly due to the impact of higher tax rates, and the dividend payout ratio remained at 50%. The bank stated that under the drive of carbonated beverages, sales volume in the first two months recorded double-digit growth, with a strong start. PET costs have been locked in until the end of the third quarter, aluminum can carbonated beverages, accounting for 25% of revenue, increased in price in March, supporting profit margin prospects. New channels such as vending machines, e-commerce, snack discount stores, and instant retail are growing strongly, and the company reduces channel conflicts through differentiated packaging. The management expects long-term profit margins to be driven by operating leverage, rather than input costs. The bank pointed out that COFCO Group will promote the nutrition and health food strategy under the "13th Five-Year Plan", and CHINA FOODS will use its direct-to-consumer model and about 130,000 vending machines and other self-owned channels to distribute non-cola products, although the short-term profit impact is limited, it can become a long-term growth driver.