By Yi Wei Wong


Shares of snack and beverage maker Want Want China are lower in early trading after in Hong Kong Wednesday as industry analysts flagged headwinds for earnings due to costlier raw materials and Covid-19-related lockdowns in China.

Shares of the Shanghai-headquartered company are down 11% at 6.94 Hong Kong dollars (US$0.88), putting the stock into the red for the year.

Want Want China reported Tuesday that net profit for the year ended March rose 1.1% to 4.20 billion Chinese yuan (US$626 million), below the CNY4.33 billion tipped by a FactSet survey of eight analysts, as higher raw material costs hurt gross profit margins. Shares were relatively flat immediately after the results but they rose late to end 3.6% higher amid a broad rally in Chinese stocks as Beijing announced plans to loosen pandemic-related restrictions for international travelers.

Citi analysts lowered their fiscal 2023 and 2024 net profit estimates for Want Want China by 16% and 13%, respectively, and lowered their forecast for revenue in fiscal 2023 by 6.0%, citing expectations of lower sales given China's lockdowns and higher raw material costs.

The U.S. investment bank kept a buy rating on the stock but cut its target price to HK$9.03 from HK$9.21.

Daiwa Capital analysts Anson Chan and Jonathan Ho likewise lowered their revenue and net profit forecasts, citing higher input costs and a slowdown in snack sales.

In a research note they said near-term growth could continue to challenged by lockdown measures and described the "commodity cost surge" this year as having exceeded the company's expectations. They expect gross margin pressure to persist in the near term despite the company's move to raise many of its average selling prices earlier this year.

Daiwa Capital kept its buy rating and target price of HK$8.60 on the stock.


Write to Yi Wei Wong at yiwei.wong@wsj.com


(END) Dow Jones Newswires

06-28-22 2324ET