2021 results in line. China Foods' revenue grew 14.7% YoY to RMB19,784 mn in 2021, 1.0% higher than our previous forecast. Due to rising prices of main raw materials & packaging components, gross margin shrunk 3.9 ppt YoY to 35.7%; this was also attributable to accounting rule changes, driving S&D expenses ratio down 3.4 ppt YoY to 27.1%. China Foods' normalized EBIT recorded resilient YoY growth of 12.5% in 2021. Shareholders' profit was up 14.8% YoY to RMB572 mn, 0.9% lower than our previous forecast. Total DPS for 2021 reached RMB0.125, equivalent to a payout ratio of 61.1% (2020: 49.9%).
Investors are concerned about relatively misty 2022 business outlook as a result of slowing economic growth and tight pandemic-related restrictions in China. We assume that the domestic soft beverage market will regain growth momentum in 2H2022 and beyond, in pace with gradual restoration of on-the-go consumption. However, we have reduced our gross margin assumptions for 2022-1H2023 due to rising cost pressure offsetting the positive impact from improved product sales mix and price hikes. China Foods' EPS is estimated to deliver YoY growth of 3.4%/ 14.4%/ 16.6% in 2022-2024, respectively.
In our view, during the period of US Federal Reserve rate-hike cycles, along with lingering macro uncertainties, consumer staples stocks with higher dividend yield and fewer political risks, such as China Foods, are more likely to outperform the market. Maintain "Buy". Our TP of HK$3.90 is equivalent to 15.0x/ 13.1x/ 11.2x 2022-2024 PER.