Last Traded Price (17 Jun 2021): HK$28.70 (HSI : 28,559)
Price Target 12-mth: HK$28.20 (2% downside) (Prev HK$32.00)
Alice HUI CFA +852 36684182 alicehuism@dbs.com
Alison FOK +852 36684170 alisonfok@dbs.com

Investment Thesis
Decent sales rebound. Vitasoy’s decent FY21 sales performance indicates that the worst should be over. While the occasional resurgence of COVID cases may still raise some near-term uncertainties, we expect the overall recovery to continue. Despite our positive stance on sales recovery, we are becoming slightly more cautious towards margins, expecting its upside to be capped given rising commodity costs and continued brand investment.

China to remain the core driver. The 49% jump in 2HFY21 sales in China, or a 14% growth vs 1HFY19 (pre-COVID level), indicates that operations have largely normalised. We expect China to sustain the recovery with sales projected to
maintain a double-digit growth. Its new Dongguan plant, which commenced operations in Aug 2020, should provide sufficient capacity for expansion in the next few years.

Better outlook but mostly in the price. We have cut our FY22- earnings forecasts by 12% on lower margin assumptions and introduced FY23 forecast. But with sales recovery, this should drive an FY21-23 earnings CAGR 19%. Although recovery appears to be on track, its premium valuation should have also priced in the expectations. Maintain HOLD.