In 2023, Want Want China (00151) will once again become a "repurchase maniac".
According to data from Zhitong Financial APP, from March 10 to December 14, China Want Want has carried out a total of 32 share repurchases, with a total of 4,566 repurchases40,000 shares, accounting for 039%。
However, investors seem to have developed "aesthetic fatigue" with Want Want China's share buybacks. Recently, the company's stock price once fell to 4HK$25 low of the year, compared with the high of the year**224%, compared to the 2022 high**454%。
The performance recovery can hardly hide the decline
According to the observation of Zhitong Financial App, the stock price performance of Want Want China is actually contrary to the company's recent performance. According to Want Want China's results for the six months ended September 30, 2023, the company achieved revenue of 1127.5 billion yuan (RMB, the same below), a year-on-year increase of 41%;Profit attributable to equity holders of the company 173.2 billion yuan, a year-on-year increase of 85%。On the other hand, in fiscal year 2022, the company achieved revenue of 2292.8 billion yuan, a year-on-year decrease of 44%;Profit attributable to equity holders of the Company is approximately 337.2 billion yuan, a year-on-year decrease of 198%。
In terms of products, Want Want China mainly operates four types of products, namely rice cracker products, including sugar-coated roasted rice crackers, salty crispy rice crackers, fried snacks and gift packsDairy products and beverages, including flavored milk, ambient yogurt, lactic acid beverages, ready-to-eat coffee, fruit juice drinks, sports drinks, herbal teas and milk powdersSnack foods, including candies, ice creams, small steamed buns and jellies, nuts, etc.;Other products, mainly alcohol, etc.
Among them, dairy and beverage revenue is the majority of the company's revenue, which can contribute more than half of Want Want China's operating income, while rice cracker revenue, snack food revenue and other product revenue are secondary. According to financial data, in the first half of fiscal year 2023, Want Want China's dairy and beverage revenue was 609.7 billion yuan, a year-on-year increase of 71%, accounting for 54% of revenue;Among them, the revenue of "Wangzai Milk" grew by a single digit year-on-year. The revenue of rice crackers increased by 4% year-on-year5%, up to 20600 million yuan, of which the main brand rice crackers increased by a single digit. Snack food revenue declined by 1 year-on-year5% to 301.2 billion yuan.
Zhitong Financial APP learned that China's Want Want performance growth in the first half of the fiscal year has rebounded significantly, mainly due to three reasons: first, brand innovation;The second is the innovation of sales channels;The third is to develop overseas markets.
At the level of brand building, Want Want China, as a food brand that has been developing for decades, has been criticized by the market for a long time for its brand aging. But the company didn't let the brand age. The company said in the financial report that the company implements a brand differentiation strategy, broadens the age group of consumers, and launches differentiated sub-brands for mothers and infants, young children, silver-haired, women, fitness people, etc., to meet the diversified needs of consumers. The company's new products launched in the past five years have accounted for nearly double-digit revenue in the first half of fiscal year 2023. For example, "Frozen Idiot", "Double QQ Sugar", "Langweixian Creative Fancy Potato Rolls", "Milk Candy Street Drink Series" and other products.
In terms of channel construction, in the first half of fiscal year 2023, Want Want China's emerging channels expanded the coverage of terminal outlets, including vending machine upgrades, content e-commerce, OEM and other channels. Content e-commerce and social e-commerce interact with hot topics and promote product content. In addition, in the first half of fiscal year 2023, Want Want China's overseas business revenue achieved high double-digit growth. The Vietnam plant, which is an important overseas production base, has already started accepting overseas orders. At present, five overseas subsidiaries in Vietnam, Thailand, Indonesia, Germany and North America have been put into operation.
The long-term growth trend is uncertain
Even so, Want Want China's share price performance still does not give a satisfactory answer, and the reasons for this are worth playing.
From the perspective of Want Want China, the company's performance has already entered a "stagflation period". In fiscal year 2018, Want Want China achieved revenue of 2071.2 billion yuan, and by fiscal year 2022, the company's revenue only increased to 2292.8 billion yuan;Net profit after tax for the period increased from 346.3 billion yuan fell to 336.3 billion yuan. It can be seen that although Want Want China is adjusting its business strategy in multiple dimensions, the company is still relying on its past popular products to "gnaw at the old capital".
According to Frost & Sullivan data, the market size of the snack food industry in 2021 will be 825.1 billion yuan, and the CAGR from 2016 to 2021 will be 61%, and the CAGR is expected to continue to maintain at 6With a growth rate of 8%, the scale will reach 115 trillion yuan. However, under the trillion-scale capacity of snack food, there is an obvious homogenization problem, and the overall situation is still in the state of "big industry, small enterprise", and the competition is very fierce. Euromonitor data shows that the CR4 of domestic snacks is only 97%, compared to 38% in the United States and 23% in Japan8%。
In such a competitive background, the snack rivers and lakes show a trend of "you sing and I will appear". From 2012 to 2020, the rise of e-commerce channels drove the high growth of Three Squirrels, Baicaowei and BESTORE. Subsequently, the development of county and community formats accelerated, superimposed consumption Xi returned to rationality, and snack mass sales channels entered the fast lane. Mass-selling snack brands represented by Zhao Yiming and Snacks are very busy began to "hunt" the snack food market, so that the high-end snack brand BESTORE began to "cut prices to survive", and the three squirrels also emphasized the slogan of "high-end cost performance".
As a long-established food brand, it is not easy for Want Want China to occupy the "commanding heights" in the minds of consumers for a long time, in addition to "lasting" and "renewing".
As Bank of America** said in its research report, Want Want China's interim revenue and after-tax earnings for fiscal 2023 increased by 4% year-on-year from a low base1% and 85%, down 1% and 17% year-on-year respectively in the past two years. Affected by the weak macro and consumer value awareness, snack discount stores have expanded rapidly in the mainland. BofA believes that the company's lack of enthusiasm in these channels compared to its peers may lead to a continued slower recovery than its peers, as well as potential loss of domestic market share in the future.
Accordingly, Bank of America** lowered the target price of Want Want China from 5HK$2 was reduced to HK$5, reiterating the "underperform" rating. BofA lowered its earnings per share by 4% and 3% for the current and next fiscal years, reflecting lower sales growth expectations and higher finance costs. It was a surprise that the company announced that it would not pay an interim dividend and indicated that it was considering whether to pay a final dividend. Even though the company is considering replacing it with a share buyback, Bank of America believes that paying dividends in the Hong Kong market is a more effective way to reward shareholders.
Jefferies issued a research report saying that it maintains a "hold" rating on Want Want China and a target price of 5HK$8 to HK$5HK$3. For the second half of fiscal 2024, the company's management expects positive revenue growth, with fourth-quarter sales growth offsetting third-quarter pressures due to a high base.
Morgan Stanley said in the research report that Want Want China is operating steadily, and its investment in emerging channels and overseas channels is expected to drive long-term growth, while earnings will remain stable in the short term. Dividend payments are likely to be lower, which is worth paying attention to. Da Mo maintains the company's "in sync with the market" rating, with a target price of 6HK$2 reduced to 5HK$3.
Da Mo believes that Want Want China's valuation is reasonable, and since the valuation has been at a historical low since 2009, there is no expected major downward reevaluation, but there is a lack of catalyst in the short term. Da Mo lowered Want Want's earnings per share forecast for fiscal 2023 to 2025 by 7% to 8%, reflecting higher investment and higher financial expensesIt is also expected that Want Want's sales for the full fiscal year ending March next year will increase by 5% year-on-year.
In the view of Zhitong Financial APP, Want Want China uses the strategy of "channel expansion + brand diversification + overseas expansion" to make the company's performance pick up in the short term, but the company's new products are still in the form of "group" to hit the market, and there is still a long way to go before the emergence of products of the magnitude of Wangzai's milk. Although it is difficult for mass-selling snack food brands to shake the status of Want Want China in terms of sales for the time being, it cannot be ruled out that with rapid expansion, snack food upstarts will have a time to catch up.
Want Want's "breakthrough" needs to race against time.