Why CGS Sweetened Food Empire's Target Price to S$4.00

But what is driving his bullish outlook, and what are the underlying risks and assumptions? 

The Growth Engine: Strong Performance in Russia
A primary driver for the target price upgrade is Food Empire’s stellar performance in its largest market, Russia, which accounted for 31.4% of the company's 9M25 sales.

William Tng, CFA, analystWith the Russian ruble appreciating slightly against the US dollar in 4Q of 2025, Food Empire is expected to see a significant revenue boost.

Consequently, CGS raised its FY25F core net profit forecast by 7.9% to a record US$68.9 million.

If Food Empire hits this mark, its actual net profit could comfortably beat Bloomberg consensus expectations by 12.6%.

Looking further ahead, CGS also raised its FY26-27F core earnings per share (EPS) estimates by 1.9-6.1%, driven by potentially stronger ongoing sales momentum in Russia.

Valuation Re-rating and Peer Comparison
The market is increasingly willing to pay a premium for Food Empire's earnings.

CGS has re-rated Food Empire's valuation multiple to 20.5x its FY27F price-to-earnings (P/E) ratio, which represents 3 standard deviations above its 10-year average.

Despite its share price surging 159% in 2025, the stock still trades at an attractive 7.7% discount to its international coffee peers and a massive 20.8% discount to its international beverage peers.

New Revenue Streams in Vietnam
Food Empire is aggressively diversifying its revenue streams.

CGS highlights that in Vietnam, the company recently soft-launched ready-to-drink beverages, including energy drinks and a bird’s nest drink, tapping into a fast-growing market driven by Gen Z demand.

Zapp is an energy drink which Food Empire has soft launched in Vietnam. It is part of a range of ready-to-drink beverages, including a bird’s nest drink.

Furthermore, a new US$80 million freeze-dried soluble coffee manufacturing facility in Central Vietnam is slated to come online in early FY28F, giving Food Empire the expanded capacity to grow its own brand sales and open up another distinct revenue stream.

Key Assumptions
This S$4.00 target price rests on several crucial analyst assumptions:

• Stable Margins: CGS assumes Food Empire will successfully maintain its gross profit margin at an elevated 30.50% through FY26-27F.
  
  
• Consistent Payouts: The firm expects a steady dividend payout ratio of approximately 70% over the next three years.
  
  
• No Immediate Dilution: CGS assumes that Ikhlas Capital, which holds a US$40 million redeemable exchange note (REN), will not convert its investment into Food Empire shares during FY26F.
  
  

Downside Risks
CGS highlights several potential downsides that could derail this growth:

• Geopolitical Tensions: An escalation of the Russia-Ukraine conflict could severely disrupt operations or damage factories in Food Empire’s core markets.
  
  
• Currency Fluctuations: Because Food Empire purchases raw materials in US dollars but sells finished products in local currencies, any depreciation of the Russian ruble against the USD would negatively impact net profits due to translation losses.
  
  
• Cost Inflation: Unexpected increases in raw material and freight costs could pressure operating margins.
  
  
• Dilution Risk: If Ikhlas Capital eventually chooses to convert its notes into shares in FY27F, it would increase the total number of outstanding shares by 8.6%, potentially reducing the target price down to S$3.68.

See also: FOOD EMPIRE: DBS Says This Company is Heading for Strategic Exit, Initiates Coverage with $3.40 TP