Vitasoy's fiscal 2020 results were slightly better than the previous profit warning. As a result of a series of events, including the COVID-19 epidemic, social unrest and drought, the company's fiscal year-on-year revenue fell 3.9% to HK $7.233 billion in fiscal 2020. Sales of Vitasoy in mainland China and Hong Kong fell 2.7% and 6.9% respectively compared with the same period last year. In the second half of fiscal 2020, Vitasoy revenue fell 17.2 per cent year-on-year.

Vitasoy's gross profit margin for fiscal 2020 fell 0.4 percentage points year-on-year to 53.3 per cent. The proportion of Vitasoy sales costs rose a further 1.2 percentage points year-on-year to 29.2%. Net profit for shareholders of Vitasoy fell 23.0 per cent to HK $536 million in fiscal 2020 from a year earlier.

Since May, the company has regained its growth in the mainland, with further distribution of channels and product lines. With the reopening of schools, restocking of channels and the growth of online / new retail channels, we expect the company to return to growth in the mainland since May, but the Hong Kong business will suffer for longer. The company has launched more new soy milk and beverage products to complement its product line and expand consumer groups. Vitasoy actively embraces new retail channels and new media, works strategically with fast-growing new retail platforms, and dabbles in live e-commerce.

The company has gained more market share in Chinese mainland and Hong Kong. Better management incentives are conducive to the long-term development of the company.

We maintain a "neutral" rating because of its unattractive valuation and uncertain industry outlook. However, we see that the company has made great progress in terms of channel layout and product structure, so we have raised the target price to HK $32.20, which is equivalent to 54.3x / 41.6x 37.0x 2021 / 2022 / 2023.