TINGYI(00322) 海通国际·2024-05-27 12:02Investment Rating - The report initiates coverage on Tingyi Holdings Corp (322 HK) with an "Outperform" rating, setting a target price of HKD 12.1, implying a 27% upside potential [4][45] Core Investment Thesis - Tingyi is a dual industry leader in instant noodles and soft drinks in China, with strong channel control and market penetration [3] - The company benefits from stable growth in beverage demand, particularly in sugar-free and value-for-money products [3] - Tingyi has maintained a 100%+ dividend payout ratio historically, offering an attractive 6.2% dividend yield [4] Business Overview - Tingyi operates in two main segments: beverages (63% of revenue) and instant noodles (36% of revenue) [34] - The beverage portfolio includes tea drinks (39%), carbonated drinks (36%), juice (14%), and packaged water (11%) [35] - Instant noodles are categorized into container noodles (47%), premium bagged noodles (41%), mid-priced bagged noodles (10%), and crispy noodles (2%) [36] Financial Performance - Revenue is expected to grow at 4.8%/4.5%/4.2% from 2024-2026, reaching RMB 84.3/88.1/91.8 billion [45] - Net profit is forecasted to increase by 7.0%/6.5%/5.2% during 2024-2026, reaching RMB 3.34/3.55/3.74 billion [45] - Gross margin is projected to improve by 0.6 percentage points in 2024, driven by price increases in beverage products [4] Industry Analysis Soft Drinks - China's soft drink market reached RMB 637.2 billion in 2023, with 5-year CAGR of 2.9% [15] - Key growth categories include carbonated drinks (7.9% CAGR), energy drinks (6.9%), and sports drinks (6.7%) [15] - Sugar-free beverages are growing rapidly, with 21.7% CAGR from 2018-2023 [19] Instant Noodles - The instant noodle market experienced 5.5% CAGR from 2015-2022, driven by pandemic demand [30] - Post-pandemic, the market faces challenges from food delivery services and changing consumer preferences [32] - Premiumization remains a key strategy, with high-end products driving growth [30] Competitive Advantages - Strong channel control with extensive coverage in small cities and rural markets [3] - Strategic partnerships with PepsiCo, Starbucks, and Ovaltine enhance product portfolio [7] - Experienced management team with long-term equity incentives aligning interests [8][12] Valuation - The report values Tingyi at 19x 2024 PE, below the sector average of 27.1x [47] - The valuation reflects the company's stable growth profile and attractive dividend yield [45] Growth Drivers - Continued expansion in sugar-free beverage products [3] - Premiumization of both beverage and instant noodle product lines [35][36] - Channel optimization and cost control measures [4]