Want Want's Resilient Top Line and Profit Growth in Fiscal First Half; Price Hikes Announced

Narrow-moat Want Want reported first-half fiscal 2021 earnings with revenue and net profit growing at 11% and 7% year on year, respectively, above our fiscal 2021 growth estimates of 9%. Gross margin fell short of consensus and our estimate by 110 basis points, dragged by rising input costs across all product segments. Resilience in dairy & beverages as well as robust growth in emerging channels drove the top line strength. Management highlighted its plan for raising prices across all categories from Jan. 1, 2022, with transitory channel rebates to smooth potential market impact. The firm also announced an increase in interim dividend and share buyback. We left our fiscal 2021 revenue forecast broadly unchanged but lowered our EPS outlook to CNY 0.36 from CNY 0.37 to reflect the margin pressure posed by a raw material cost hike. We maintain our fair value estimate of HKD 7 per share and expect the market to view the results favorably.