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1、 In Singapore, this research report or research analyses may only be distributed to Institutional Investors, Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore. Refer to important disclosures at the end of this report ed- LM / sa- DC Stro
2、ng result season expected F hence expect more normalized growth for FY10 ahead; hence expect more normalized growth for FY10 Top picks: China Mengniu and China Yurun Top picks: China Mengniu and China Yurun Strong FY09 results expected. We expect most F though this should be largely anticipated foll
3、owing the companys profit alert. Want Want is expected to report below-par earnings growth of 10% on impact of hiccups in its rice cracker business. Cost inflation to cap margin upside in FY10. The general uptrend in raw material costs since last year means further cost benefits should likely be lim
4、ited. Despite mounting cost pressure, HK listed players, being market leaders in their respective segments, should be in stronger positions to weather the cost upcycle, as demonstrated by their track records of relatively stable margins even at times of high inflation. Stock picks. We like Mengniu f
5、or its decent earnings turnaround and expect room for catching up considering its lagging valuation against other F the former has already released a profit alert while Tingyi, which report on a quarterly basis, provide better visibility compared with others. Cost inflation key theme for FY10 While
6、margin expansion has been the key driver for F their ability to manage cost has proven to be strong, as indicated by the relatively stable margins during periods of high inflation (for example, in 2008). We believe they should remain in strong position to ride out any cost hike. (Refer to appendix f
7、or track record on margins against raw material prices) Industry Focus Food Nongfu spring raised prices of water and juice products by 5% 10-Jan Dairy Nestle we estimate 60% payout (vs 98%+ previous year inclusive of special dividend) which we believe upside existed. With inventory normalizing and r
8、estructuring in the distribution channel starting to take effect, we expect rice cracker to resume growth in FY10. This, coupled with sustainable momentum at the beverage division, should help accelerate earnings growth with CAGR estimated at 27% in FY09-11. The key earnings risk would be the hike i
9、n raw material costs, especially sugar costs which have seen substantial increment so far. While the risk is unavoidable, Want Want has in the past demonstrated good ability to tackle cost hike and considering Industry Focus Food Thomson ( Factset (); Reuters (); Capital IQ () and Bloomberg (DBSR GO
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