3Q23 on track with expectations
- 3Q23 on track with expectation, net earnings rose 38% yoy
- Company trims guidance on China/HK, now expecting low-to-mid single digit growth, and flat sales in FY23E
- Our last rating stood at a BUY, TP at HK$8
On track with expectations. Nissin Foods’ 3Q23 results were on track with our expectations. 3Q23 revenue declined 2.9% to HK$2956m, dragged by softer demand for bag-type instant noodle, and unfavourable RMB currency, but reflective of an improvement vs. 2Q, where revenue decline was less severe. By segment, HK sales declined 3.5%, while China declined 2.5% or +1.4% in currency neutral terms. GP margin lifted 2.6ppt to 34.0%, with continued effects from price hikes and easing of raw material costs. Net earnings rose 38% y-o-y to HK$99m in 3Q23. In 9M23, net earnings rose 16% to HK$270m, accounting for 72%/77% of consensus full year estimates.
Trimmed China/HK guidance as expected by market. In FY23E, Nissin Foods expects to achieve low-to-mid single digit topline growth (Rmb terms) for China, while HK to achieve flat sales (previous guidance: China: mid-single digit, while HK: low-to-mid single digit), indicating a reversing trend in 4Q23. Nissin notes that Cup noodle sales have been recovering steadily, which should support a gradual recovery in this category. Second, Western & Northern regions are returning to growth and have achieved 15-20% y-o-y in monthly sales since 3Q23 and should continue to do so ahead. HK sales remained pressured as bag-type noodle remains quite weak due to high outbound travel, hence the company looks to further diversify its non-noodle product offerings including yogurt. Vietnam operations was targeted to breakeven by June’24, but the Company has achieved this earlier than expected in 3Q23, thanks to an increase in export sales to Europe. Our last rating stood at a BUY, with TP at HK$8.