This Equity Research Report focuses on Vitasoy International (00345 HK), a company in the food and beverage sector. The report highlights that the company's FY22 revenue was in line with expectations, but profitability missed due to a 23.4% YoY decline in mainland China sales, which was affected by local COVID-19 resurgences and the impact of a PR crisis in July 2021. However, revenue from Hong Kong/Australia and New Zealand/Singapore grew resiliently. Gross margin dropped YoY to 47.2%, and EBITDA plunged 73% YoY. The company reported a shareholders' loss of HK$159 mn in FY22. The report expects Vitasoy to achieve steady top-line growth with resilient gross margin since 2HFY23, with mainland China sales expected to reach HK$4,069 mn/ HK$4,475 mn/ HK$4,945 mn in FY23-FY25, respectively, and revenue from overseas markets to maintain solid growth momentum. The management plans to address higher raw material costs by enhancing long-term procurement arrangements, broadening sourcing scope, and adopting price increases.
