On Friday, Morgan Stanley (NYSE:MS) raised its rating on shares of Foshan Haitian Flavouring (603288:CH) from Underweight to Equalweight, adjusting the price target to RMB36.20 from the previous RMB36.80. The adjustment reflects the firm's recognition of the company’s improved market position and business resilience.
The analyst from Morgan Stanley noted that Foshan Haitian's reinforced leadership and its potential for continued market share growth justify a valuation premium.
Despite a challenging external environment, the company has resumed its trajectory of gaining market share. This outlook is based on discussions with Foshan Haitian's newly elected chairman, Cheng Xue, and CEO Guan Jianghua, who have set a target for a compound annual growth rate (CAGR) of sales at 10% over the next five years. They also aim to achieve a corresponding profit growth rate.
The company's strategies for reaching these targets include gaining continuous market share in existing categories, expanding into new categories, and aiming for overseas growth in the long term.
Morgan Stanley highlighted that after a year of inventory destocking in 2023, Foshan Haitian is once again on the path to increasing its market share. The company has intensified efforts to penetrate new points of sale and to develop more fragmented products and channels.
The upgrade comes after a period of strategic adjustments by the company, which appears to be setting the stage for sustained growth and profitability in the coming years. Foshan Haitian's management's commitment to these growth drivers underpins the analyst's positive outlook on the stock's performance.
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