Daily Brief China: Want Want, Fu Shou Yuan, H World Group , Seazen (Formerly Future Land) and more

• Want Want (151 HK) and China Mengniu Dairy Co (2319 HK) are both fairly liquid names in the China consumer staples sector. 
• Both companies trade at virtually the same forward PE of 14x.  However, I expect Want Want’s near term sales growth to be lower than market expectations.  
• The upside risk for Want Want could be its overseas expansion efforts, as overseas sales now account for mid to high-single-digit of sales and grew high-teens yoy in FY1H24. 

• The high growth in 23H1 is unsustainable. 23H2 YoY revenue growth would be single-digit. Due to 23H1’s high base, we cannot rule out the possibility of negative growth in 24H1.
• In the case of lower-than-expected external M&A activities, Fu Shou Yuan has accumulated a large amount of cash, which would drag down ROE. So, current dividend policy still needs improvement. 
• Fu Shou Yuan’s expansion would be relatively moderate. Double-digit revenue growth can still be expected in the long term. The market value of above RMB15 billion is more reasonable. 

• H World Group (1179 HK) has been over-penalised by market weakness as its share price was off 16.8% YTD. It turned around in 3Q23 and guidance for 4Q23 is solid.
• Surge in operating and adjusted EBITDA margins indicated high operating leverage. Occupancy has not returned to 2019 level, but there will be more margin expansion when this happens.
• 55% of rooms in China are of economy type, and 82% are in tier-2 and below cities. Such characteristics allow it to benefit from the prevailing consumption downgrade. 

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