Goldman Sachs: Quoting TINGYI (00322), next year's core focus will be on improving profit margins, and it is expected that future cost inflation will benefit its pricing strategy.

Goldman Sachs released a research report stating that it gave a "buy" rating to TINGYI (00322) with a target price of HKD 12.7. Goldman Sachs conducted a non-deal roadshow with the management of Master Kong on Monday (3rd) this week at the Food and Beverage Enterprise Day, and Master Kong's profit target for the fiscal year 2025 (double-digit growth in recurring net profit year-on-year) is expected to be achieved, mainly due to price base effects, cost tailwinds, efficiency improvement measures, and strict promotion management. Looking ahead to 2026, the management of Master Kong reiterated that improving profit margins will be a core focus, while also expecting to resume revenue growth and continue to drive efficiency improvement measures. The company usually locks in purchases of various raw materials for half a month to several months. The bank pointed out that in the third quarter of 2025, instant noodles resumed positive growth from July, and it is expected to continue this trend in the future, while carbonated beverages have maintained positive growth since the third quarter. On the other hand, the cost trend remains favorable: the gross profit margin and overall profitability of the beverage business benefit from cost advantages. As for the instant noodle business, the cost of palm oil rose by 10% year-on-year in the third quarter, remained roughly stable in October, easing compared to the first half of the year, along with price increase measures implemented since 2024, driving the expansion of gross profit margin in 2025 and the second half of the year. Goldman Sachs indicated that in terms of pricing strategy for the beverage business, the management of Master Kong stated that there were no large-scale promotions during the peak season (although some channels increased investment to cope with intense competition), but if sales continue to be sluggish in 2026, they may reconsider the pricing strategy for large-size beverage SKUs (which have been raised since April last year). The company actually believes that future cost inflation for beverages and instant noodle products may be favorable for its pricing strategy, as it has continued to implement price hikes since 2024.