【行业研究报告】中国飞鹤-Completion of channel restructuring continues to drive a steady 2H recovery

todriveasteady2Hrecovery
Wemoderatelytrimour2022/23Eearningsby6-7%p.aaswenowattemptto
factor-in1)alowerGPM(byaverage0.8pp)duetohighernon-infantmilkformula
contributionand2)a1.5pphighersellingexpense.Ourforecastingeneralisat
thelowend/slightlybelowmanagementguidance,aswebelievealowbirthrate
couldcompoundwithanintensifyingcompetitiontoweighonmarginsanddrive
uppromotionexpenses.Despitethis,Feihe’ssequentialsalesrecoverysustains
ourBUYrating.
Guidancemaintained.ManagementtargetsDDHoHrevenuegrowthin2H
andLSDrevenuedeclinefor2022E(1H22:-16.2%YoY).Margin-wise,Feihe
andLSDrevenuedeclinefor2022E(1H22:-16.2%YoY).Margin-wise,Feihe
indicatedthat2HGPMandNPMwillimproveHoH,withfullyearGPMand
NPMstandingat66-68%(1H22:68%,2021:70.3%)andc.26%(1H22:
23.3%,2021:30.2%),respectively.Withthat,thisimpliessellingexpense
ratiotostabiliseatc.30%inlongerterm(1H22:32.5%).
Salesmixupgradehasbeenanimportanttoplinesupport.WhileChina’s
IMFmarkethasbeenunderpressureinrecentthreeyears,superpremium
andsuperpremium+(teensofgrowthYoYin1H22)segmentsmaintaineda
steadilyupwardmomentum,accordingtomanagement.Feihewouldbea
majorbeneficiaryfromthistrend,givenaheavyweight(c.59%in1H)ofthese
segmentsinitsrevenuestructure.
Newhealthandnutritionrelatedproductcategoriescouldbecome
importanttoplinedriversinlongerterm.Newproductcategories,
includingchildrenmilkpowder(stage4productsaccountedforc.12%of
infantmilkpowderrevenuein1H)andadultmilkpowder(stillsmallrevenue
contribution),aremakingincreasingrevenuecontribution(in%terms).The
companyisalsolookingatopportunitiesforexpandingintoothercategories,
suchascheeseandinfantcomplementaryfood.Marginscouldstilltrend
downinlongertermwithincreasingcontributionfromchildren(GPMc.60%)
andadultmilkpowder(GPMofpremiumSKUsc.50%).
Valuation.OurnewTPisbasedonanunchanged11.5xend-22EP/Ewhich
stillrepresents-1sdbelowitslongtermaverage.Inourview,thelowearnings
visibilityoftheIMFindustryhasnotconvincedusofavaluationroll-overat
themoment.