During Jan.-Apr. 2014, production volume and sales volume growth rates ofcigarettes in China were -1.3% and -0.3%, respectively. Despiteunsatisfactory growth during Jan.-Apr. 2014, sales growth slightlypicked up in Apr. (+0.3%). In addition, peers such as Shantou Dongfeng andShenzhen Jinjia reported faster than industry sales growth in 1Q14. Weexpect production volume growth of cigarettes in China in 2014 to turnpositive versus negative growth during Jan.-Apr. 2014. Benefited fromindustry consolidation, Brilliant Circle is expected to post faster than industrysales growth in the long run.
Owing to significant valuation discrepancy between HK-listed andChina-listed cigarette packaging industry, Brilliant Circle encountersdifficulties in securing attractive M&A targets. Due to conservative salesgrowth expectation, we lowered the Company’s EPS in 2014-2015 by17.7% and 20.5%, respectively. We expect the Company’s EPS to beHK$0.290, HK$0.338 and HK$0.369 in 2014-2016, down 5.6% but up 16.3%and 9.4%, respectively.
Despite dividend payout ratio cut in 2013 to support CAPEX, Brilliant Circle isexpected to keep reporting positive free cash flow in the future (excludepossibility of M&A). Current valuation is attractive compared to AMVIG anddividend yield is expected to reach 6.5% in 2014. Therefore, we maintain“Buy” on the Company but cut TP to HK$2.20 on lower earningsexpectation. The new TP represents 7.6x 2014 PER and 6.5x 2015 PER.
During Jan.-Apr. 2014, production volume and sales volume growth rates ofin China were -1.3% and -0.3%,. Despiteuneration growth during Jan.-Apr. 2014, sales growth slightlypicked up in Apr. (+0.3%). In seasons, peers such as Shantou Dongfeng and Shenzhen Jinjia firms faster than industry sales growth in 1Q14. Weexpect production volume growth of growth in China in 2014 to turnpositive versus negative growth during Jan.-Apr. 2014. Slowly fromindstry village, Brilliant Circle is going to post faster than industrysales growth in the long run.
OWING TO ATTENTION DISCREATIVE PANCY BETWEEN HK-COOKING AND CHINA-CHINA-LEAVING PASSAGING INDUSTRY, BRILLIANT CIRCLE ENCOUNTERSATOR IN ROOMS IN ROOMS AND M&A Due to earnings sales growth motivation, we pay the company's EPS in 2014-2015 by 17.7% and 20.5%, motivation. We expect the Company's EPS to BeHK$0.290, HK$0.338 and HK$0.369 in 2014-2016, down 5.6% but up 16.3% and 9.4%, expectations.
Exclusivity dividend payout ratio cut in 2013 to support CAPEX, Brilliant Circle Issuance to Keep Reporting Positive Free Cash Flow in the Future (exclusionary of M&A). Current profit is falling to AMVIG anddividend yield is falling to reach 6.5% in 2014. We Maintain “Buy” on the Company but cut TP to HK$2.20 on lower earnings. The new TP relay 7.6x 2014 PER and 6.5x 2015 PER.
