Investment Rating - The report maintains a "Buy" rating for China Feihe (6186.HK) with a target price raised to HKD 5.21, indicating a potential upside of 23.2% from the current price of HKD 4.23 [5][7][8]. Core Views - Despite a challenging competitive environment, China Feihe's fundamentals have significantly improved after two years of channel reforms, with healthy channel inventory levels and a notable recovery in terminal prices. The sales of ultra-premium new products have shown strong growth, contributing to an expansion in overall brand strength and market share [5]. - The management is optimistic about revenue acceleration in the second half of 2024, projecting a double-digit year-on-year revenue growth for the full year [5][6]. - The company continues to focus on product premiumization, with ultra-premium product revenue growing by 19.6% in the first half of 2024, while high-end and regular product revenues declined [5][6]. Summary by Sections Revenue and Profitability - In 1H24, China Feihe's infant formula revenue grew by 5% year-on-year, with offline sales increasing by 3% and online sales by 9%. The current channel inventory is estimated at one and a half months, which is considered healthy [5]. - The gross margin for 1H24 expanded significantly by 2.6 percentage points to 67.9%, driven by product mix improvement and recovery in overall pricing after implementing various channel reforms [5][13]. - The company expects to maintain a high gross margin level, although marketing expenses may increase starting in 2H24, potentially putting pressure on net profit margins [5][6]. Dividend Policy - China Feihe announced a dividend of HKD 0.1632 per share for 1H24, with a payout ratio increasing to 72.2% from 66.2% in 1H23. The management reiterated a commitment to a 10% annual increase in absolute dividend amounts, maintaining a payout ratio above 70% [6][7]. Financial Forecasts - The report projects a revenue of RMB 20,497 million for 2024, reflecting a year-on-year growth of 4.9%. The core net profit is expected to reach RMB 4,387 million, a 7.5% increase compared to the previous year [11][14]. - The financial metrics indicate a PE ratio of 8.1 for 2024, with a return on equity (ROE) forecasted at 15.0% [11][12].
中国飞鹤：产品结构高端化趋势2H24有望持续，重申加大派息力度