[ET Net News Agency, 8 February 2018] HSBC Global Research lifted its target price for
Health and Happiness (H&H)(01112) to HK$65.4 from HK$55.7 on higher earnings estimates and
change in HKD/RMB forecast, and reiterated its "buy" rating.
The research house believes H&H will continue to deliver strong top-line and earnings
growth in 2018. HSBC looks for 34% earnings CAGR on the back of 19% revenue CAGR over
2017-19. It raised its 2018-19 earnings estimates by 9-10% to reflect stronger revenue for
the Baby Nutrition & Care business (59% of revenue) and adopt the latest HKD/RMB exchange
rate of 1.25 (previously 1.18).
HSBC believes H&H will benefit from trade-up and consolidation trends in China as its
Biostime infant formula brand is held in high regard by consumers as a premium imported
brand.
Moreover, the research house believes that the recipe registration requirement should
help drive further industry consolidation over the next few years. For the Adult Nutrition
& Care business (41% of revenue), H&H is expanding its direct sales in China through
partnerships with major ecommerce platforms and baby specialty stores. The contribution
from direct sales increased from 14% in 2016 to 27% in 1H 2017, and to around 31% in 3Q
2017. HSBC believes it could reach 40% in 2018 and 50% in 2019. (KL)