Tingyi Earnings: Soft Second-Half Sales Dragged on Earnings

Narrow-moat Tingyi reported 2023 results that fell short of our estimates on revenue and profit, as the company increased channel expenditures amid soft demand across instant noodles and beverages. We lowered our 2024 revenue and net income projections by 2% and 8%, respectively, and think top-line growth would trend below management’s guidance in the mid- to high-single-digit range. We left our long-term forecasts largely unchanged, as our prior view did not bake in aggressive growth. As a result, we retained our fair value estimate at HKD 12.70 per share, which implies 20 times 2024 P/E, 9 times EV/EBITDA, and a 5% dividend yield. We see shares as undervalued with a 2024 dividend yield of 7.5%, but we note some investors could be concerned about its muted top-line growth in the near term. Management also highlighted its intention to retain the 100% dividend payout ratio over the next few years. We think this can be maintained with Tingyi’s operating cash flow and stable capital expenditure.