"Large Banks" Huayan lowers WANT WANT's target price to 5.2 yuan, reduces revenue and net profit forecasts

HSBC's research report indicates that WANT WANT CHINA (00151.HK) saw a year-on-year revenue growth of 2.1% for the first half of the fiscal year ending in September, while net profit decreased by 7.8%, both falling short of the bank's expectations, primarily due to operating expenses significantly exceeding expectations. Starting from the 2025 fiscal year, the company is restructuring its product departments, leading to a substantial increase in administrative costs due to a rise in personnel; advertising and promotional expenses have also increased due to the promotion of new products. Although these measures have brought certain benefits, such as double-digit year-on-year growth in emerging channels and discount snack channels, they have also raised concerns about the stability of the profitability of these channels.

The bank has revised down its revenue forecasts for WANT WANT CHINA for the fiscal years 2025 to 2027 by 1.9%, 1.9%, and 2.2%, respectively, while raising the forecast for the sales and administrative expense ratio by 1 to 1.4 percentage points during the same period. Net profit forecasts have been revised down by 9.8%, 9.9%, and 10.5%, respectively; the target price has been lowered from HKD 5.7 to HKD 5.2, maintaining a "Hold" rating due to the company's dividend payout ratio being below the industry level