Encouraged by its recovering growth prospects, Citigroup Global Markets (花旗環球證券) and Yuanta Securities Investment Consulting (元大投顧) have raised their target prices and earnings forecasts for Tingyi (Cayman Islands) Holding Corp (頂益控股), China’s biggest maker of packaged food.
Citigroup this week raised Tingyi’s target price to HK$21 (US$2.70) from HK$13.80, and revised up its earnings forecasts to US$396 million this year, US$487 million next year and US$579 million in 2011.
Yuanta, meanwhile, adjusted upward Tingyi’s target price to HK$17.80, from HK$14.80 and raised its earnings per share forecast this year by 6.8 percent to HK$0.607, and next year by 5.4 percent to HK$0.738.
Headquartered in Tianjin, China, Tingyi produces and distributes instant noodles, beverages and bakery goods marketed mainly under the Master Kong (康師傅) brand.
It is the leader in the Chinese market for instant noodles, ready-to-drink tea and bottled water, and is among the top-three players for diluted juice drinks and sandwich crackers.
At an investor conference in Taipei on Tuesday, Tingyi chairman and CEO Wei Ing-chou (魏應州) said the company had set a revenue target of three to four-fold growth over China’s projected GDP over the next five years for its beverage business.
Wei saw ready-to-drink tea as the fastest-growing category as it fits in with Chinese drinking habits and given a still low per capita consumption.
He also forecast stable growth for the company’s bottled water and diluted juice division given a general lack of quality tap water in China, rising health-consciousness among consumers and government support for fruit farmers.
Yuanta, however, cited potential competition from foreign makers in its report.
“Just as Tingyi’s dominant position in instant noodles and beverages makes it hard for competitors to expand market share in these segments, we are concerned that Tingyi’s focus on them will allow competitors, including Coca-Cola and Pepsi, to gain a strong grip on segments that Tingyi is overlooking,” Yuanta said in the report.
Wei acknowledged that Coca-Cola China was the company’s biggest rival, but added that Tingyi aimed to beat the US firm with its advantages in cost and efficiency in the short term and through larger economies of scale in the longer term.
Meanwhile, parent company Ting Hsin International Group (頂新集團), a Taiwanese owned enterprise that also runs Wei Chuan Foods Corp (味全食品) in Taiwan, is set to transfer about 190 million shares of Tingyi that it owns to a depository bank to issue up to 380 million Taiwan depositary receipts (TDR).
The TDR will be listed on the Taiwan Stock Exchange on Dec. 17.
Following the issuance of the TDR, Ting Hsin would still own about 33.2 percent of Tingyi.