Tingyi Posed Cautious Earnings Guide for 2023, but We Retain Our HKD 14.90 Fair Value Estimate

Narrow-moat Tingyi reported 2022 results that were below Refintiv consensus on the top line and net profit, but slightly above our estimates. Management guided to 2023 net profit that was below consensus estimates, as the company intends to raise channel expenses in order to gain back market share. We think the company’s net profit guide is cautious and it could benefit from reviving foot traffic as well as lower input costs in 2023. While there could be near-term headwinds to the share price with the below-consensus profit guidance, we maintain our fair value estimate at HKD 14.9 per share (19 times 2023 P/E) and believe investors could consider the stock price correction as an entry point opportunity.