Key points from this report:
- Buy China Feihe (CHIF.HK): The stock broke out of a stage-one 11-week consolidation on strong volume and is trading constructively above its key moving averages.
- The stock combines strong technical ratings (RS Rating 87, A/D Rating B+) and best possible fundamental ratings (SMR Rating A, EPS Rank of 99).
- Since 2016, China Feihe’s margins have been consistently expanding, driven by the growing contribution of the high-end milk formula segment. Going forward, we see China Feihe as a key beneficiary of premiumization and the ongoing consolidation trends in the milk industry.
- Consensus expects revenue growth to accelerate to 45% and 30% in 2020 and 2021, respectively (from 26% in 2019), led by its leading share in the premium Chinese infant formula market and driven by exceptional online sales growth.