HSBC upgrades Master Kang's rating to buy, with a target price raised to 10.8 Hong Kong dollars

On August 14th, Jinshi data reported that HSBC’s research report expects that Kangshifu (00322.HK) will outperform the market’s expectations for the half-year performance, and the group’s profitability is expected to improve positively under the price increase and cost reduction. Therefore, its rating has been upgraded from hold to buy, with the target price raised from 10.4 Hong Kong dollars to 10.8 Hong Kong dollars. The report mentions that Kangshifu’s first-half profit is expected to rise by 12.7%, higher than the market consensus of 8.3%, and the profit forecast for Kangshifu from 2024 to 2026 is also higher than the market consensus of 5% to 7%, as it is believed that the market consensus does not reflect the price increase of Kangshifu’s instant noodle business in the third quarter. It is expected that the price increase will impact sales volume but benefit gross profit margin and net profit margin. HSBC Research has respectively lowered the revenue forecast for Kangshifu from 2024 to 2026 by 1.2%, 1.1% and 1.3%, but increased the gross profit margin by 1.4%, 1.6% and 1.5%, and the profit forecast by 3%, 4.1% and 3.2%.