Foshan Haitian Earnings: Products and Channel Transitions Drove Profit Growth; Maintain Valuation

Wide-moat Foshan Haitian Flavouring and Food Company’s third-quarter results were mixed with revenue above our estimate but net profit in line with the forecast. The ramp of new products across retail and catering channels drove better top-line growth, while alleviating input costs further helped gross margin expansion. Net profit grew 12% year on year, partly affected by asset impairment. We think Haitian is on the right track to refresh its product portfolio as well as recover its competitiveness in the catering channels. We slightly increased our 2024 revenue and net profit estimates due to better third-quarter results but left our long-term forecasts intact. We retain our fair value estimate at CNY 42 per share and think shares are fairly valued now following the rally in recent months.