Haitong International Raises Yihai International's Target Price to HK$20, Anticipating Steady Improvement in Profit Quality

Haitong International has released a research report indicating that, based on recent communications with the listed company, YIHAI INTL (01579) has a clear operational strategy for 2026. The focus is shifting from scale expansion to structural optimization. The B2B segment is transitioning from acquiring new clients to deepening relationships with existing ones, overseas business continues to grow rapidly, and the instant fast-food segment is stabilizing and recovering. Costs and capital expenditures are controllable, and profit quality is expected to steadily improve, providing strong resilience for earnings growth. The firm maintains its valuation of 18 times the 2026 price-to-earnings ratio for the company. Due to exchange rate fluctuations, the target price has been raised from HK$19.8 to HK$20. Considering the rapid growth in the company's B2B and overseas businesses, along with the stabilization of related-party operations, an "Outperform" rating is maintained. The company's third-party business shows robust growth momentum, supported by a solid dual-driver structure from B2B and overseas operations. Large B2B business is projected to grow by 20% to 30% in 2026, with approximately 200 existing clients. Products are being upgraded from peripheral items like spices and chicken powder to higher-value-added categories such as sauces and seasonings, reducing substitution risks and enhancing profit stability. Small B2B business is shifting to online customer acquisition via Douyin, using standardized hotpot ingredient combinations to ensure profitability and is currently in a rapid growth phase. Overseas third-party business is expected to grow by 30%, with well-established channels in mature regions like Southeast Asia and the US, and rapid volume growth in Japan and South Korea. The Thailand factory is increasing capacity utilization through product expansion and B2B development, with no current plans for new overseas factories, indicating steady and orderly globalization. The report maintains previous forecasts, estimating total revenues for 2026 to 2028 at RMB 7.0 billion, RMB 7.62 billion, and RMB 8.21 billion, respectively. Net profits are projected at RMB 1.01 billion, RMB 1.12 billion, and RMB 1.22 billion, corresponding to earnings per share of RMB 0.97, RMB 1.08, and RMB 1.18.