Investment Rating - The report maintains a "Buy" rating for China Feihe (6186.HK) with a target price of HKD 4.9, indicating a potential upside of 17% from the current price of HKD 4.19 [4][12]. Core Insights - China Feihe's revenue for the first half of 2024 reached HKD 10.09 billion, a year-on-year increase of 3.7%, while net profit grew by 18% to HKD 1.91 billion. The company is expected to benefit from a potential recovery in birth rates in 2024, signaling the end of the industry's worst period [1][2]. - The company continues to focus on high-end product offerings, with ultra-high-end product revenue increasing by 19% to HKD 7.14 billion, and the introduction of new premium products [1][2]. - The company has a strong cash position with net cash of HKD 20 billion, allowing for continued shareholder returns, with a projected dividend growth rate of at least 10% [2][12]. Financial Performance - The gross margin for the first half of 2024 was 67.9%, an increase of 2.6 percentage points year-on-year, driven by a higher proportion of ultra-high-end products and reduced promotional efforts [1][2]. - The net profit margin improved to 18.9%, up 3.3 percentage points year-on-year, reflecting effective cost management and increased profitability [1][2]. - The company reported a dividend per share of HKD 0.1632 for the first half of 2024, a 21% increase from the previous year, with a payout ratio of 70% [2][12]. Product Strategy - China Feihe is committed to upgrading its product structure towards high-end offerings, launching new products such as preterm infant formula and organic milk powder [1][2]. - The company plans to expand its functional nutrition segment with new adult nutrition milk powder and cheese products in the second half of 2024 [1][2]. Market Outlook - The report anticipates a recovery in birth rates in 2024, which could positively impact the infant formula market, although the industry faces challenges from declining birth rates and intense competition [1][2]. - The company is strategically managing channel inventory to stabilize end prices amid a competitive landscape [1][2].
中国飞鹤：业绩逆势增长，投资价值显现