Tingyi Set for Earnings Recovery in 2023; Retain HKD 14.90 FVE

We spoke with management of narrow-moat Tingyi ahead of the Lunar New Year and revised our 2022 profit estimates due to higher cost assumptions, but we broadly retain our 2023 sales and net income forecasts. We think improving foot traffic and channel expansion could help drive mid-single-digit top-line growth this year and a slightly higher net income versus 2021. Tingyi’s shares are trading at 16 times 2023 P/E, which is below the five-year historical average of 19 times. The company’s stock has lagged food and beverage peers over the past few months, likely due to investors’ concern about the impact from the pickled noodles sales decline following its food safety incident. We think the company could recover its instant noodle sales through other product lineups and benefit from lower palm oil prices in 2023. Normalizing foot traffic should also boost beverage sales. As a result, we retain our fair value estimate at HKD 14.90 per share and think shares are attractive at the current price.