Tingyi’s 2H Result in Line; Strong Distribution Should Drive Its Midterm Growth

While Tingyi’s earnings were largely in line in the second half, we are increasing our fair value estimate for Tingyi to HKD 17.70 from HKD 16.70 per share to mainly reflect the CNY appreciation against the HKD. We expect Tingyi to continue to benefit from product premiumization with new high-end product launches and to strengthen its leading position by leveraging its extensive distribution network both through online and offline channels. We believe the company’s continuous investment in marketing high-end products and development of new products that target the middle class and strengthening distribution in rural regions are positive drivers for midterm growth. We forecast the firm to grow at CAGRs of 5.6% and 6.4% in revenue and net profit through 2025, respectively. We think the shares are attractive at the current levels.