Want Want To Face Slower Long-Term Growth; Lowering FVE to HKD 6.50 per Share

We transfer coverage of Want Want China, maintaining our narrow moat rating but lowering our moat trend rating to negative from stable as we think the current portfolio and channel composition could gradually erode the company’s ROIC going forward. We lower our fair value estimate to HKD 6.50 per share, from HKD 7.00 per share, which implies a forward P/E of 14 times, below its historical average, reflecting our more muted growth assumptions. Our fair value estimate also implies an EV/EBITDA of 10 times and FCF yield of 7%, broadly in line with domestic peers. We think its share price has largely priced in any positive catalysts from the recently announced price hikes and we remain cautious on its longer-term prospects based on the current business strategies.