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Investing.com - Goldman Sachs downgraded Zhengzhou Qianweiyangchu Food Co (001215:CH) from Neutral to Sell on Sunday, while raising its price target to RMB27.00 from RMB19.00.
The downgrade comes despite the company reporting better-than-feared third-quarter sales, though net profit came in 16% below Goldman Sachs’ expectations. Zhengzhou Qianweiyangchu Food anticipates continued improvement in both revenue and profit for the fourth quarter, with this positive trend expected to extend into next year.
Goldman Sachs cited valuation concerns as a key factor in the downgrade, noting that the stock has risen 30% year-to-date, pushing its price-to-earnings ratio to 38x. This valuation stands significantly above industry peers Sanquan and Anjoy, which trade at 14-17x, and exceeds Zhengzhou Qianweiyangchu’s own three-year average of 25x.
The investment bank also identified fundamental downside risks, including competition from leading players in major to-B and KA channels, where Zhengzhou Qianweiyangchu may struggle to maintain market share.
Goldman Sachs expressed concerns about the company’s financial vulnerability, pointing to its relatively smaller sales, slim margins, and expectations of free cash flow outflow for several years.
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