Net profit in 2020 increased by 20.3% over the same period last year, and business growth was in line with expectations: for the whole of 2020, Riqing Foods recorded a total income and net profit of HK $35.2 / 300 million, an increase of 14.0% and 20.3% over the same period last year. Of this total, revenue from Hong Kong and overseas markets increased by 9.1%, and Chinese mainland market grew by 17.5%. The main reason for the continuous recurrence of the epidemic in 2020 has led to a surge in demand for instant noodles and frozen food in various business markets of the company in 2020.

Double-digit sales growth in China is expected in 2021, which will continue to provide the main driving force for the company's future business growth: in 2020, people in Hong Kong and overseas will live mainly to reduce community contact. Retail sales in supermarkets increased by 9.7% over the same period as consumers hoarded daily necessities at home, and the company, as a leader in the convenience food market, particularly benefited from this behavior change. Coupled with the fact that consumers have formed certain convenience food eating habits, we expect the company's sales performance in Hong Kong and overseas markets in 2021 to maintain a steady trend compared with 2020. Chinese mainland region, the company recorded a total revenue of HK $2.1 billion in 2020, accounting for 59.7% of the company's total revenue, the company has achieved more than double-digit revenue growth in the Chinese mainland market for three consecutive years (RMB). Benefiting from the company's continuous strengthening of brand promotion in China, the two major high-end instant noodle brands have achieved excellent performance in Chinese mainland. In product research and development, Hewei co-advertised with popular Japanese animation, continuously developed innovative products, and launched four new flavor products of ramen in November 2020, the company's high-end noodle series influence continued to ferment in the consumer market. The new joint venture distribution business in Shanghai started operation in April 2020, which has made a great contribution to the company's sales growth and business expansion in China, and the business foundation in East China has been further consolidated. At present, the company is continuing to devote itself to regional expansion and development, and making further investment in West China and North China, and is expected to further expand its business coverage in the future, coupled with the continued upgrading of the high-end structure benefiting from poverty alleviation, we expect the company's sales of Chinese mainland to maintain double-digit growth in 2021.

Lower the target price to HK $7.38 and maintain the buy rating: to sum up, we expect the company to maintain a good performance growth trend. however, due to the continuous upward trend in the cost of bulk materials such as palm oil and flour in the market, which may put some pressure on the company's future earnings growth, uncertainties increase, so the company's target price is lowered to HK $7.38, which is equivalent to 22.0 times earnings forecast for 2022. Maintain the buy rating.

Important risks: 1) higher-than-expected cost prices of bulk materials; 2) increased competition in the mainland market; and 3) a greater-than-expected decline in demand for home food in the Hong Kong market.