Pricing with upside

Investment Thesis

China to remain core driver. China should remain the group’s core driver and deliver 10% sales growth in FY21F, with it accelerating to 13% in FY22F. We forecast the China sales contribution to rise to 66% of total sales by FY22F. With higher input costs, we think Nissin Foods may follow its competitor and raise pricing in China.

Still a solid market share gainer. Relative to other instant food players, we expect Nissin Foods to continue to gain market share within the Rmb5+ category. Nissin Foods has a strong branding and market position in South China, with rising exposure in the East, North, and, recently, West China. The group’s expanding revenue base in these newer regions should raise its production efficiency.

Operating margin to recover with normalised sales trajectory in FY22F. With higher palm oil prices, we expect the
operating margin to contract 1.5ppt and thereafter recover by 0.2ppt in FY22F.