Morgan Stanley's research report stated that Want Want China (00151.HK) sales in the first half of the fiscal year fell short of market expectations. However, the bank pointed out that the sales trend from April of this year to the present fiscal year 2025 has improved quarter by quarter, mainly benefiting from the change in the Lunar New Year timing, as well as single-digit growth in October. In addition, imported whole milk powder prices have recently recorded double-digit year-on-year increases. Management expects the gross margin in the second half of fiscal year 2025 to be flat or slightly lower than the first half, with the target of achieving a stable gross margin in fiscal year 2026.

The bank downgraded the company's rating from 'outperform' to 'neutral,' and slashed the target price from the original 6.4 yuan by a significant 27% to 4.7 yuan. Additionally, the bank also lowered the company's net profit forecasts for 2025 to 2027 by 9%, 9.4%, and 11.2% respectively, to reflect rising costs of whole milk powder and below-expectation revenue growth. The bank stated that the company only saw stable demand before the Lunar New Year on a comparable basis, and anticipates increased capital expenditure due to overseas expansion plans. Management has not yet planned to raise prices to offset raw material cost pressures, and has indicated an increase in advertising and promotional investments to drive growth in domestic and overseas markets.