1Q22 results on track with expectations

Nissin Foods (1475.HK) – 1Q22 results on track with expectations 

  • Net earnings declined 3.1% to HK$90m, on-track with market expectations
  • Revenue rose 10.1% y-o-y, driven by China (+11.9%), and HK (+6.6%) 
  • Recent lockdowns in China have encouraged stock-up by consumers, with Shanghai revenue rising by 15% in April alone, coupled with price adjustment made in March to offset higher material costs. 
  • Maintain BUY with TP unchanged at HK$7.90 

Net earnings declined 3.1% to HK$90m, equivalent to 26% of consensus estimates, on-track with market expectations.  Revenue rose 10.1% y-o-y to HK$1,062m driven by China (+11.9%), and HK (+6.6%) 

Hong Kong sales rose 6.6% due to strong demand for bag-type noodles with the resurgence of COVID. Conversely, the rise in raw materials impacted segment profit. Hong Kong segment profit declined 25% to HK$124m. 

China sales rose 11.9% to HK$704m (in Rmb: +8.6%), equivalent to 66% of revenue. This is driven by sales volume growth in cup-type instant noodles. The Company has made price adjustments for cup-type and bag-type noodles starting March this year.  Segment profit rose 8% y-o-y to HK$102m. 

Gross profit margin contracted 0.8ppt to 31.3%, due to higher raw material costs, increase in production costs (fuel cost up 40% y-o-y) as COVID-19 cases rose. 

In Hong Kong, Nissin Foods has executive various price adjustment in Hong Kong since the start of April’22. With the gradual relaxation in social distancing measures, this should normalise instant noodle demand, while non-noodle business should see mild recovery. 

As for China, recent lockdowns have encouraged citizens to stock-up on daily necessities, which has been positive to Nissin Food’s volume growth. In fact, Shanghai revenue rose 15% y-o-y in April alone.  Recent price adjustment in March should help partly offset surges in material costs. 

Retain BUY, TP unchanged at HK$7.90