Maintain investment rating as "Buy". We raise EPS forecasts for 2022-2024 to RMB0.239 (+0.026)/ RMB0.260 (+0.018)/ RMB0.289 (+0.007), respectively, due to 1) higher-than-expected ASP and 2) lower price assumptions on raw materials and packaging components. China Foods' current dividend yield seems attractive.Our TP of HK$3.60 represents 13.2x/ 12.1x/ 10.9x 2022-2024 PER.
　　Resilient growth in sales value in 1H22. China Foods' 1H22 sales volume fell 4% YoY amid macro headwinds. ASP grew 10% YoY due to 1) price hike, 2) mix improvement (including product innovation), and 3) packaging structure upgrade.To sum up, total revenue increased 6.0% YoY to RMB11,894 mn. Shareholders' profit grew 19.0% YoY to RMB481 mn, which slightly beat expectations.
　　Marginal improvement on sales volume and profitability expected in 2H22. 1) The management expects total revenue to achieve mid-single-digit growth for 2022. In our view, in its operating regions, the end users' acceptance of its core products with inflated retail price may exceed market expectations. The channel profit allocation mechanism will be more stabilized, and the Company's pricing system will become more efficient as a whole. 2) Thanks to marginal relief on cost pressure, we expect China Foods' gross margin to bottom out.
　　Catalysts: Stronger-than-expected peak season sales (due to favorable weather conditions); potentially more effective range of Covid-19 prevention strategies.
　　Risk factors: Intensifying competition in China's beverage markets; impact from resurgence of Covid-19 pandemic exceeding expectations.