CICC released a research report stating that it maintained the unified enterprise China (00220) “outperforming the industry” rating, raised the 2024 and 2025 profit forecasts by 11% each to RMB 1.72 billion and RMB 1.89 billion, respectively, and raised the target price by 15% to HK$7.5 billion. The company's overall revenue growth in the first quarter of 2024 was low by double digits, achieving net profit of 457 million yuan (same below), a year-on-year decrease of 6.3%. After excluding the revenue from the Hefei factory's land sale in the first quarter of the year (about 256 million yuan), comparable net profit doubled year-on-year and exceeded expectations, mainly due to an increase in gross margin that was better than expected.
The bank mentioned that the beverage business continued to grow strongly in the first quarter of unification. By business, CICC expects beverage revenue to increase by double digits during the period, with food revenue growing in low units. Furthermore, the trend of high-end food continues, and the share of food revenue above 5 yuan will increase by 0.5 percentage points to 44%. The gross margin for the first quarter is expected to increase by 4-5 percentage points year on year. Among them, the gross margin increase is slightly higher than that of beverages. The improvement in gross margin mainly benefits from falling prices of raw materials such as PET and palm oil, product structure optimization, and increased capacity utilization and continued reduction. The company achieved a good start during the period. Under a low base, revenue and performance in 2024 are expected to improve markedly; the company's investment value is prominent.