Yihai International (1579.HK): Fast expansion of Haidilao underpins future momentum August 8, 2018 603

Investment Summary

Yihai is a leading and fast-growing compound condiment manufacturer in PRC. This May, its biggest related party Haidilao has submitted hearing materials to HKEX, which showed that Haidilao restaurants would continue to expand at a high speed. As Haidilao`s exclusive provider of hot pot soup flavoring products, Yihai is expected to benefit from the quick expansion of Haidilao restaurants. We thus increase Yinhai`s EPS forecast to be RMB0.358 in FY18E, assuming 40x PE, and give target price of HKD16.47. (Exchange rate=0.87RMB/HKD) (Closing price at 6 Aug 2018)

Business Overview

Haidilao underpins future sales hike. In 2017, revenue from related party Haidilao reached RMB915mn (+51% YoY). Haidilao, owning 273 hot pot restaurants in PRC with daily sales per shop amounting to RMB140k and SSSG keeping 14% in recent 3 years, has submitted listing documents to HKEX in May. It indicates that the number of newly opened stores will total to 180~220 in 2018E. We thus highlight the great potential for Yihai`s sales hike, given it is the exclusive provider of hot pot soup flavoring products to Haidilao.

About the author

Profile photo of Eurus Zhou

Eurus Zhou
Phillip Securities (HK)

Graduated from Hong Kong Polytechnic University, Master of Finance (Investment Management). Possess bachelor degree majoring in Financial Management from Southwestern University of Finance and Economics. Focus on industry prospect and corporate fundamentals to explore investment value and cover pharmaceutical and consumer industry.

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