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雷达卡
Resume coverage on F&B sector with a positive view
We resume coverage of the non-alcoholic ready to drink (NARTD) and
packaged food sector with a positive view going into 2012. We expect:
(1) Accelerating top-line growth, cycling weaker comps in 2011 caused
by bad weather, high COGS inflation, and slowing RTD tea growth. (2)
Non-carbonated soft drinks to lead the sector as one of the fastest
growing consumer segments (16% yoy per Euromonitor). (3) Recovering
margins credited to stabilizing COGS, further driving earnings momentum.
Against this backdrop, we resume coverage of Tingyi (Buy); Want Want
(Neutral), and initiate coverage on Uni-President China (Sell).
Buy Tingyi: More bullish on 2012 recovery
Our 2012E/2013E NPAT forecasts are 17% and 15% above Bloomberg
consensus estimates. We believe that the market is underestimating Tingyi’s
recovery in 2012 as we expect: (1) Impressive sales recovery following a
weak 2011, as distributors begin restocking after channel issues in 2011,
further penetrating lower-tier cities and price increases in bowl noodles; 2)
additional cost rationalization including reducing bottle weight on top of
stabilizing COGS will drive better-than-expected margins; and (3) we are
positive on Tingyi’s proposal to become PepsiCo’s China bottler as our
“blue sky” scenario analysis suggests 14% earnings upside by 2015E.
Sell UPC: Caught in the cross-fire
We believe that UPC’s beverages division is likely to be caught in the cross-
fire between Coca-Cola and Tingyi if Tingyi’s deal with PepsiCo is approved.
Moreover, the company’s aggressive Rmb12bn capex spend over 2011E-
2013E, which will increase PET capacity by 86% by end-2012, is likely to drag
utilization lower, impacting margins. Consequently, our 2012E/2013E NPAT
forecasts are 17% below consensus, respectively
Neutral on Want Want: Robust growth but adequately valued
We forecast Want Want to deliver strong earnings growth of 30%/21% in
2012E/2013E. We expect sales and GP margins to benefit from price hikes of
3%-5% in 2011. However, the stock is trading at 26X 2012E price on core EPS,
close to its historical average of 28X. Without a positive catalyst in the near
term, we believe the stock is adequately valued.
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