20180601-广发证券_香港_-颐海国际-01579.HK-Capacity_able_to_meet_increasing_demand_from_Haidilao_s_expansion_3页_548kb

Yihai International (1579 HK) Equity Research Summary

Core Content Overview

This research report from GF Securities (Hong Kong) provides an analysis of Yihai International, a company primarily engaged in the production and sales of hotpot condiments and related products. The report highlights the company's growth prospects, financial performance, and strategic initiatives, while also outlining key risks and valuation metrics.

Key Highlights

Company Overview

• Sector: Consumer
• Rating: Buy (maintained)
• Target Price: HK$15.43 (up from HK$12.53)
• Analysts: Ou Yafei and Liu Qiao

Growth Drivers

• Haidilao Expansion: Haidilao, Yihai's major client, has increased its restaurant count by 17% since the end of 2017, reaching 320 as of May 8, 2018. It plans to open 180-200 new stores in 2018.
• Self-Heating Hotpot Sales: Yihai has shifted focus to offline sales of self-heating hotpot products, currently available at around 300 dealers. The company expects more FMCG players to enter the self-heating hotpot market, increasing competition and customer reach.
• Capacity Expansion: Yihai's Maanshan factory has been expanding capacity, and the new Bazhou plant is expected to come online in 2019, supporting future growth.

Financial Performance

• Revenue Projections (Rmb m):
  • 2016A: 1,088
  • 2017A: 1,646
  • 2018E: 2,435
  • 2019E: 3,107
  • 2020E: 3,770
• Growth Rate (%):
  • 2016: 28%
  • 2017: 51%
  • 2018: 48%
  • 2019: 28%
  • 2020: 21%
• Net Profit Projections (Rmb m):
  • 2016A: 187
  • 2017A: 261
  • 2018E: 377
  • 2019E: 479
  • 2020E: 584
• EPS (Rmb):
  • 2016: 0.18
  • 2017: 0.25
  • 2018E: 0.36
  • 2019E: 0.46
  • 2020E: 0.56
• Valuation Metrics (P/E):
  • 2018: 33.2
  • 2019: 26.15
  • 2020: 21.43
• PEG Valuation: Based on a 0.78x PEG, the company is fairly valued at 35x 2018E P/E.

Balance Sheet Highlights

• Total Assets (Rmb m):
  • 2016A: 1,424
  • 2017A: 1,807
  • 2018E: 2,151
  • 2019E: 2,602
  • 2020E: 3,179
• Equity Attributable to Parents (Rmb m):
  • 2016A: 1,266
  • 2017A: 1,501
  • 2018E: 1,803
  • 2019E: 2,186
  • 2020E: 2,654
• Retained Earnings (Rmb m):
  • 2016A: 288
  • 2017A: 518
  • 2018E: 820
  • 2019E: 1,203
  • 2020E: 1,671

Cash Flow Highlights

• Operating Cash Flows (Rmb m):
  • 2016A: 224
  • 2017E: 326
  • 2018E: 320
  • 2019E: 451
  • 2020E: 628
• Net Increase in Cash (Rmb m):
  • 2016A: 787
  • 2017E: 155
  • 2018E: 39
  • 2019E: 100
  • 2020E: 320

Key Risks

• Food Safety Risks: As Haidilao expands, there may be increased pressure on food safety standards.
• Market Competition: The hotpot condiment market is becoming more competitive, with potential new entrants.
• Sales Performance: Offline sales of self-heating hotpots may not meet expectations due to market dynamics or consumer adoption rates.

Stock Performance

• A chart is included showing the stock performance, sourced from Wind. It illustrates the historical and projected price movements.

Rating Definitions

• Buy: Stock expected to outperform the Hang Seng Index by more than 15%.
• Accumulate: Stock expected to outperform the Hang Seng Index by 5%-15%.
• Hold: Stock relative performance ranges between -5% and 5%.
• Underperform: Stock expected to underperform the Hang Seng Index by more than 5%.

Analyst Certification & Disclosure

• The analysts certify that the views expressed reflect their personal opinions and that no remuneration is linked to specific recommendations.
• No proprietary trading division or affiliated entities hold shares in the mentioned securities.
• No investment banking relationship with the companies in the past 12 months.
• Analysts and associates do not serve as officers of the company and have no financial interests in the securities.

Disclaimer

• The report is for informational purposes only and does not constitute an offer to buy or sell securities.
• GF Securities (Hong Kong) accepts no liability for losses arising from the use of the report.
• Investments involve risks, and past performance does not guarantee future results.
• The report may contain different viewpoints from other communications issued by GF Securities (Hong Kong).

Conclusion

Yihai International is positioned to benefit from Haidilao's continued expansion and the growing self-heating hotpot market. With capacity expansion and a strategic shift towards offline sales, the company is expected to deliver strong earnings growth over the next few years. The valuation suggests a fair price of HK$15.43, based on a PEG of 0.78. However, the report acknowledges potential risks, including food safety concerns and market competition, which should be considered in investment decisions.