By Kimberley Kao


Want Want China shares jumped in Hong Kong a day after the China-focused snack maker reported higher profit and better-than-expected profit margins.

Shares were recently 8.8% higher at 4.80 Hong Kong dollars (61 U.S. cents) on Wednesday, on track for their biggest one-day percentage gain in more than a decade.

Want Want, which sells rice crackers, flavored milk, candies and other foods primarily in China, on Tuesday reported an 18% rise in net profit for the year ended March, helped by cost controls, a lower effective tax rate and a 2.9% rise in sales. Its gross profit margin rose to 46.6% from 43.9% a year earlier.

Citi research analysts Xiaopo Wei and Vincent Young said in a note that top-line growth was weaker than expected, but gross profit margin beat estimates, helped by softer raw-material prices. They kept a buy rating, projecting that GPM upside will offset potential sales weakness and combine with festival marketing and cost controls to drive earnings growth in the new fiscal year.

Daiwa analysts Steven Nie and Carlton Lai, in a research note, described the results as a strong beat thanks to the margin recovery, which they expect to continue on favorable raw-material costs. They cautioned that a potential significant deterioration in the Chinese economy could drag consumer demand, but they raised net profit forecasts for the next two fiscal years by 8%-10% on higher margin assumptions.

Citi kept the target price at HK$6.60, while Daiwa maintained it at HK$5.60.


Write to Kimberley Kao at kimberley.kao@wsj.com


(END) Dow Jones Newswires

06-26-24 0137ET