Tingyi Earnings: Noodles Share Recovered, but Input Costs Could Still Weigh on Beverage Margins

Narrow-moat Tingyi posted first-half 2023 results that slightly outpaced our expectations, primarily due to better-than-expected margins in the instant noodles segment. However, we lower our fair value estimate to HKD 14.30 from HKD 14.90 on currency headwinds and lower midterm profit assumptions due to higher sugar prices. Otherwise, we maintain our view that the company should reach its 2023 sales and net profit guidance. We also retain our long-term view that volume in beverages and prices in instant noodles are key top-line growth drivers for Tingyi. Overall, we think the share price is attractive versus historical multiples. Management expects 100% payout over the next few years.