Goldman Sachs lifts China Feihe stock rating to Buy, target to HK$7.40

Published 14/04/2025, 14:00
Goldman Sachs lifts China Feihe stock rating to Buy, target to HK$7.40

On Monday, Goldman Sachs analyst Leaf Liu revised the rating for China Feihe Limited (6186:HK) (OTC: CFEIY), a leading Chinese infant formula company, from Neutral to Buy. Accompanying this upgrade, Liu also increased the price target for the company’s shares from HK$4.80 to HK$7.40. This adjustment reflects a more optimistic stance on Feihe’s prospects based on several key factors.

Liu pointed out that despite a recent 5% decline in Feihe’s share price following its 2024 earnings, which fell short of expectations due to lower one-time gains and challenges in the adult nutrition segment, the outlook for the company has improved. The analyst cited a more stable forecast for the infant milk formula (IMF) industry from 2025 to 2027, Feihe’s strong market share in both offline and online sales channels, and the company’s successful push into higher-tier regions.

Furthermore, Liu believes that Feihe’s continued emphasis on premium products will support a more robust margin outlook. Based on these assessments, Goldman Sachs now projects an 18% upside potential for Feihe’s stock, compared to the average -4% for the sector.

The revised price target is underpinned by adjusted net profit estimates, which are expected to increase by 4-6% from 2025 to 2027. Additionally, the price target is based on an elevated price-to-earnings ratio for 2026, set at 13.5 times, up from the previous 9.0 times. This change implies that Feihe’s stock offers a compelling investment opportunity relative to its global peers.

Liu’s analysis also includes a narrower discount rate for Feihe, now at 35%, compared to the previous 55%. This adjustment is based on the company’s performance during the 2020-2022 period, which showed similar top-line growth and higher visibility of recovery, with a projected 11% compound annual growth rate in reported earnings from 2025 to 2027.

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