FY2020 results were in line with our expectations. China Foods' sales value slightly grew 0.4% YoY to RMB17r249 million but overall sales volume fell 2.9% YoY in 2020. Specifically, sparkling drinks sales increased 4.0% YoY, while juice and packaged water sales decreased 10.9% YoY and 14.3% YoY, respectively. Due to significant decline in procurement prices of PET during 2020, along with improvement in product mix and packaging structure, overall gross margin rose 3.1 ppt YoY to 39.6% in 2020. The Company's adjusted EBIT and shareholders' profit reached RMB1.243 million and RMB499 million, up 21,2% YoY and 19.4% YoYt respectively, in line with our expectations.
　　Solid long-term growth momentum despite rising near-term cost pressure. We expect China Foods' revenue from sparkling drinks and packaged water to grow at CAGR of 7.4% and 8.0%, respectively, from 2020 to 2023. In addition to the five new beverages introduced in 2020 （each achieving more than RMB 10 million in revenue）， China Foods launched the brand new 'AH!-HA!' series and *Chun Vue' soda water in 1Q2021 in order to take a bite out of the fast-growing market for flavored health-based soda water. Moreover, China Foods continued to expand its customer base and actively adjusted its client structure. However, owing to a surge in material prices, the Company's gross margin is estimated to deteriorate in 2021.
　　Maintain '*Buy" rating and raise TP to HK$3.95. The Company is expected to offer more attractive dividend yield with solid long-term eamings growth outlook and higher-than-expected payout ratios. Our new TP of HK$3.95 implies 17.8x/ 16.0x/ 14.2x 2021-2023 PER and 1.8x 2021 PBR.