CICC: Maintains YIHAI INTL(01579) target price of 15 Hong Kong dollars, with a rating of "outperform the industry".

Zhongjin released a research report stating that YIHAI INTL (01579) was dragged down by related parties beyond expectations, and it lowered its profit forecast for 2025/2026 by 9%/7% to 0.79/0.89 billion yuan. The current trading is at 16/14 times 2025/2026 P/E; considering the upward shift in market valuation, the target price is maintained at 15 Hong Kong dollars, corresponding to 18/16 times 2025/2026 P/E and a 12% upside potential, maintaining an outperform industry rating. The bank expects the company's revenue in the first half of 2025 to be basically flat year-on-year, third-party income to grow by single digits year-on-year, and net profit to remain flat. Zhongjin's main points are as follows: Steady growth in third-party in the first half of 2025 The bank expects third-party revenue to increase by single digits year-on-year in the first half of 2025, with hot pot base performing > seasoning adjustment > instant hot pot. Benefiting from adjustments in butter product prices, the launch of high cost-effective products, and strong growth in dipping sauce business, hot pot base is expected to achieve high single-digit year-on-year growth; seasoning adjustment may achieve mid-single-digit year-on-year growth due to the late start of summer this year, delaying the launch of crayfish seasoning; the instant hot pot business is still adjusting, traditional small hot pot may decline slightly year-on-year due to demand and competition, new home cooking series is performing well, and the bank expects the instant hot pot business to achieve low single-digit year-on-year growth. Other B-side businesses in the first half of the year contributed to the company's strategic development of small Bs and customized services. The bank expects overseas business to increase by 30% in the first half of the year, showing impressive performance. The bank expects the company's affiliated shareholding in the first half of the year to remain stable, possibly affected by adjustments in product structure and slight downward pricing year-on-year. Profit margin and profit are expected to remain stable year-on-year in the first half of 2025 The bank expects the gross profit margin in the first half of 2025 to be basically flat on a year-on-year basis. On the expense side, the bank expects promotional expenses, especially e-commerce investment, to be saved, but the increase in shipping costs due to overseas business development and the growth in logistics costs may lead to an overall increase in the sales expense ratio, while the management expense ratio is expected to remain steady year-on-year. Considering that the reduction in government subsidies and exchange losses affected profit performance in the first half of 2024, the increase in government subsidies and realization of exchange gains in the first half of 2025 are expected to offset the decrease in SG&A expense ratio, and the bank expects the overall net profit margin and net profit in the first half of 2025 to remain stable year-on-year. Company initiates channel refinement adjustment, revenue growth expected to rebound in the second half of the year, overseas and other B-side businesses expected to open up growth potential The company has clarified its channel strategy and initiated precision cultivation mode, opening up direct sales, direct distribution, and direct delivery for self-operated sales points to increase the coverage of KA and other sales points; traditional sales points will increase terminal control and service intensity through measures such as adding part-time staff to visit stores, and segmenting markets, increasing the coverage of business representatives in small cities, tapping into incremental space and enhancing terminal control. The bank expects that market refinement will boost revenue in the second half of the year, combined with the launch of new products, further expansion of overseas markets, and gradual effectiveness of small B business expansion, the bank expects third parties to achieve double-digit revenue growth in the second half. In the long term, the company's overseas business expansion is progressing steadily, the formation of the other B-side team is clear, and the bank expects to open up growth space. Logistics costs are expected to be optimized in the second half of the year, and the bank expects overall profitability to be stable with a potential for improvement.