Phoenix New Media Hong Kong stocks China Merchants (Hong Kong) issued a research report that the rise in raw material prices will be the theme of food and beverage companies in the second half of 2001. According to the National Bureau of Statistics, the average prices of sugar, palm oil, plastic PET and corrugated paper rose-0.1%, 51.3%, 41.4% and + 21.4%, respectively, in the third quarter of 2001 compared with the same period last year.

Although the year-on-year rise in raw material prices is worrying, what is more worrying is that the price of some raw materials is still accelerating. With the exception of sugar prices unchanged from the previous month, all others increased compared with the second quarter. Palm oil, plastic PET and corrugated paper increased by 7.1%, 6.7% and 3.1%, respectively. In addition, the prices of some raw materials have recently been at historic highs (palm oil is at a 10-year high, plastic PET is at a 2-year high, and corrugated paper is at a 2-year high).

In addition, the bank is also concerned about the price of aluminum, which is mainly used in the packaging of canned drinks. Aluminum prices have also hit an all-time high (up 60.1% year-to-date). While most beverage companies have signed annual contracts to lock in aluminum prices, supply prices are likely to be adjusted when they are re-signed in December or January. Similarly, glass prices have risen 59.4% year-to-date. Some beverage companies will face higher costs in fiscal year 22.

Overall, rotational power cuts will not have a significant impact on the food and beverage companies covered by the bank. However, if power cuts intensify, the situation may change. The bank expects more information from the companies' results announcements for the third quarter of 21.

The shares of the food and beverage companies covered by the bank generally performed well after the results were announced in the first half of 21, mainly because of relatively low valuations and low regulatory risk in the industry. In spite of this, the price-to-earnings ratios of 322HK (Buy) and Dali Foods Group (Buy) are still below the historical average, and the bank still believes that Master Kang and Dali Foods Group still have investment value before the dividend-free date of Kang Shifu's special dividend. Maintain a uniform (220HK, neutral) neutral rating.

Main catalysts: revenue growth and cost control are better than expected.

Main risk: rising raw material costs continue to depress profit margins.