Guotai Junan released a research report saying that it is covering Tingyi Holdings (00322) for the first time, giving it a "shareholding" rating, and expecting the company's net income CAGR (2024E-26E) to be about 8%. And to maintain 100% dividend in the medium term, the current stock price corresponds to a dividend yield of 6%. The company has a billion-dollar large single-product and multi-category layout, leading brand pricing capabilities. The new consumer trend drives industry expansion, and convenient noodles and diversified drinks drive stable growth. The Bank expects the company's EPS to be 0.61/0.65/0.70 yuan in 2024/25/26.
GTJA's main opinions include:
Convenient noodles and drinks have reached a scale of 80 billion, maintaining a high level of shareholder return in the long term.
Tingyi Holding Co., Ltd. started from Wei's family's top new oil factory. In 1992, it began to produce instant noodles. In 2004, its revenue scale exceeded 10 billion, and in 2012, it exceeded 50 billion. By 2023, its revenue reached 80.42 billion and its profit scale reached 3.1 billion. The main business income comes from the convenience noodle business and the beverage business, accounting for 40% and 60% respectively. The gross profit margin fluctuates around 30% for a long time, and the net profit margin fluctuates between 2% and 7%, mainly affected by the price cycle of raw materials and the economic cycle. ROE continues to improve and leads the industry. In 2023, it reached 22%. Since 2017, the company has maintained a 100% dividend or excess dividend, corresponding to a dividend yield of 5-8%. The Bank believes that the company will still maintain a high level of shareholder return from 2024 to 2026.
Building a billion-dollar large single-product and multi-category layout, with a leading brand pricing capability.
In the past 20 years, classic braised beef noodles and ice tea have been created, and the beverage business has multi-category layout, including carbonated drinks, tea, juice and water. After decades of deep-rooted channel construction, the number of outlets is expected to reach 4 million, and the market share is far ahead. The market share of instant noodles has been maintained at around 45% for a long time, and the market share of RTD sweetened tea drinks has been maintained at around 50% for a long time, ranking first in the industry for nearly ten years. Since 2018, the product has been raised six times in five years, indirectly proving its excellent brand pricing capabilities; marketing expenses have increased year by year, cost-effectiveness has improved, and the cost rate fluctuates around 20%.
The new consumer trend drives industry expansion, and convenient noodles and diversified drinks drive stable growth.
The Bank expects that the CAGR of revenue from the convenience noodle business in 2024-25E will be in the low single digits, and the CAGR of revenue from the beverage business will be around the middle single digits. Core drivers: 1) The trend of short-distance tourism drives the expansion of the beverage market. 2) Convenient noodles become a high-cost-effective substitute for catering and takeout. 3) The trend of product innovation and diversification drives growth of drinks. 4) Most products are priced at 5 yuan or below, and the low unit price means there is still room for price increases and structural upgrades in the future.
Risks: Fluctuations in raw material prices and intensifying competition.