报告名称：Dali Foods(03799.HK)Transforming from mass-market to premium name; initiating wi
报告类型：港股研究
报告日期：2016-04-20
研究机构：德意志银行
股票名称：达利食品
股票代码：03799
页数：32
简介：Diversified brand name looking to adapt to new environment; Hold
Dali has leading market shares in six food and beverage categories. It ranks inthe top five in China in the bread, biscuits, chips, herbal tea, milk beverages,and energy drinks segments under five brand names. We like themanagement’s multi-category operation skills, but we have concerns that itssales growth could slow down due to its positioning in lower-end productsegments and lower exposure to modern channels. We initiate with Hold.
Increasing headwinds due to changing consumer landscapes
Dali has ramped up its sales in the past decade, focusing on its three corestrengths: success of its follower strategy, strong penetration in the traditionalchannel and lower pricing. However, we think such strengths are becomingless useful in the new consumer landscape, given: 1) new product lifecycles inthe industry have contracted to 2-3 years (from 6-8 years in the past), makingits follower strategy less effective; 2) traditional channels are losing marketshare to other channels; and 3) consumers are trading up to premiumproducts. We expect the sales growth of its existing businesses to slow down.
New categories, new products and modern channels to drive growth
We think Dali has the potential to roll up a new category, given it has a proventrack record of category expansion, and Rmb9bn cash on its balance sheetnow, which could provide it with the firepower for future expansion.Meanwhile, we expect it to move up its product mix and increase the salesportion in modern channels in the long term.
Initiating with Hold; target price HK$5.10
We expect Dali’s sales growth to slow down to a 9.5% CAGR in 2016-18e,from 16% in 2013-15. We also expect it to increase its marketing expenses toraise its product and channel positioning. We forecast a 10.0% net profit CAGRin 2016-18. Our DCF-derived target price of HK$5.10 implies 2% upsidepotential and we therefore initiate with Hold. Upside risks: 1) successfulexpansion into new categories; 2) better-than-expected cost control. Downsiderisks: 1) sales growth decline; 2) channel stocking; 3) food safety issues. Seepages 4-6 for more details on valuation and risks.

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