Vitasoy’s 1HFY2019 results greatly beat expectations. The Company’s1HFY19 revenue was up 22.0% YoY to HKD4,448 million, mainly driven byrobust growth of mainland China business, which surged 32.9% YoY toHKD2,992 million. Meanwhile, the Company’s sales in Hong Kong operationsincreased 4.0% YoY, better than last year. Attributable to improvingmanufacturing efficiency and favorable raw materials price, the Company’s1HFY19 gross margin improved 1.4 ppt YoY to 54.1%. Vitasoy’s 1HFY19shareholders’ profit recorded HKD518 million, up 30.4% YoY, the strongestgrowth rate in recent years.
A white horse in the beverage industry. The Company's sales in mainlandachieved much higher growth than the industry, with continuous expansion inregions and channels. Vitasoy maintained a leading position in the onlinemarket with sustainable high growth. The Company re-launched its "HealthPlus" series to fight within the high-end soymilk market, but we are concernedwith its high pricing. Vitasoy’s capacity utilization rate has reached quite ahigh level, resulting in lower unit production cost. Its existing factories stillhave space for more production lines before Dongguan factory commences.
We believe that the penetration of Vita Lemon Tea is far from saturated,which can still drive Vitasoy's high growth. Due to the Company's uniquebrand culture and differentiated product positioning, new entrants in thesoymilk market pose less threat than expected. Since our last report,Vitasoy's share price has surged 21.5%. We still have confidence on theCompany's long-term growth. Therefore we maintain Vitasoy’s rating at"Accumulate" and raise TP to HK$32.00, which represents 42.8x FY2019PER, 37.6x FY2020 PER and 33.4x FY2021 PER.