Zhi Tong Cai Jing·2025-07-10 05:45Core Viewpoint - CICC maintains its profit forecast for Master Kong Holdings (00322) for 2025/26, with current trading at 14/13 times P/E for 2025/26, and a target price of HKD 14, corresponding to 17/16 times P/E for 2025/26, indicating a 21% upside potential, while maintaining an "outperform" rating [1] Group 1: Revenue and Market Share - For the first half of 2025, the company is expected to see a 2% decline in revenue, with both instant noodles and beverage segments experiencing similar declines [2] - The decline in instant noodles is attributed to price increases in July of the previous year, leading to a loss of market share, compounded by a weak macro consumption environment [2] - The company has initiated promotional activities in regional markets to stabilize market share, including increasing the quantity of classic series products without raising prices [2] Group 2: Profit Margin Improvement - The company is projected to achieve better-than-expected gross margin improvements due to price increases and a decrease in raw material costs such as PET, sugar, and flour [3] - Gross margin for instant noodles is expected to improve by 0.5-1 percentage points, while beverage gross margin is anticipated to rise by nearly 2 percentage points, leading to an overall gross margin increase of 1.5 percentage points [3] - Operating profit margin (OPM) is expected to improve by 1-1.5 percentage points, with net profit margin projected to increase by 0.8 percentage points, resulting in a 15% year-on-year growth in net profit, slightly above market expectations [3] Group 3: Long-term Investment Value - The company’s pricing strategy is seen as a short-term pressure on market share but is expected to benefit long-term profit margins and channel profitability [4] - New product launches, including vitamin juice and traditional health drinks, are anticipated to contribute positively to revenue growth [4] - The company aims to double its profits over the next 3-5 years from the 2023 baseline, with expectations of annual double-digit growth in profits and a 100% dividend payout, highlighting its long-term investment value [4]