Tingyi: Navigating Volume Headwinds Amid Selling Price Hikes; Shares Undervalued

We moderately lower narrow-moat Tingyi’s 2024 revenue and net income forecasts by 1% and 4% respectively, to factor in a softer sales volume expectation and a higher selling expenses ratio. We still expect a 12% year-on-year increase in net profit for 2024, which is within management’s guidance range of 10%-15%. The company is focusing on price hikes for its instant noodle products and we think more marketing expenses are needed in 2024 to offset the adverse impact on demand. We also lift our 2025 selling expenses ratio to account for the additional channel expenditures associated with price hikes, which leads to a 6% cut to our net profit forecast. However, we retain our fair value estimate at HKD 12.70 per share, as longer-term earnings forecasts are largely unchanged. We view shares as undervalued now, supported by a 2025 dividend yield of over 7%.