On Thursday, Jefferies updated its financial outlook for Want Want China Holdings Limited shares (HKG:0151) (OTC:WWNTF), raising the price target to HK$5.42 from the previous HK$5.30, while maintaining a "Hold" rating on the stock. The revision follows the company's second-half fiscal year 2024 performance, which showcased a 2% increase in sales and a 27% rise in net profit.
The reported sales were consistent with Jefferies' estimates, albeit 5% below market expectations. However, net profit exceeded Jefferies' forecast by 7%, attributed to a slightly better gross profit margin (GPM) and a lower effective tax rate (ETR).
The company's financial results were bolstered by efficient management practices and market conditions. For fiscal year 2025, the management has set a target for revenue growth to align with the compound annual growth rate (CAGR) of the past five years.
Moreover, they anticipate continued improvement in the gross profit margin. This optimistic outlook is partly due to the elimination of tariffs on dairy products imported from New Zealand to China, which took effect in January 2024.
In light of these developments, Jefferies projects a 3% growth in sales and a 6% increase in net profit for Want Want China in fiscal year 2025. The forecast is supported by the company's strategic focus on revenue growth and margin expansion, leveraging the favorable changes in trade policies.
Want Want China's recent performance and forward-looking strategies indicate a stable trajectory, as reflected in the price target adjustment by Jefferies. The Hold rating suggests that while the analysts see potential in the company's financial management and market strategy, they advise investors to maintain their current positions until further growth indicators emerge.
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