[ET Net News Agency, 22 January 2021] Jefferies Research lifted its target price for
Nongfu Spring (09633) to HK$45.1 from HK$43.2 but downgraded its rating from "hold" to
"underperform".
The research house believes the current valuation at 76x PE and 46x EV/EBITDA for 2022
is stretched. Market forecast already factored in 18% sales CAGR and 19% core earnings
CAGR for 2021-2022. With a market cap of US$90bn, it is about 45% of Coca-Cola's and
Pepsi's market cap. Jefferies said these two players are trading at 23x 2021 PE and 16-20x
EV EBITDA.
Jefferies expects Nongfu to report a 1% rise in net profit to RMB5bn, on a 4% decline in
sales to RMB23bn for 2020. Its net profit forecast includes RMB300m forex loss from the
proceeds raised from its IPO. But it expects the company to return to its historical
growth trajectory of high teens sales growth from 2021. Due to the low base in 2020,
Jefferies assumed a 21% rise in sales to RMB28bn in 2021. (KL)