Goldman Sachs cited Tingyi as focusing on improving profit margins next year, expecting future cost inflation to benefit its pricing strategy

TINGYI (00322.HK) opened nearly 0.9% lower this morning (5th), then fluctuated and rose, reaching a high of HKD 11.86 during the day, up 4.3%, and the latest price is HKD 11.79, up 3.7%, making it the blue-chip stock with the largest increase, with a transaction volume of HKD 247 million.

Goldman Sachs recently released a report, stating that on Monday (3rd) during the Food and Beverage Companies Day, they conducted a non-deal roadshow with TINGYI's management. TINGYI is currently still facing challenges in achieving its sales target for the fiscal year 2025 (originally expected to be flat to low single-digit growth), mainly due to weak beverage business; however, the profit target (double-digit year-on-year growth in recurring net profit) is still expected to be achieved, mainly benefiting from pricing base effects, favorable cost conditions, efficiency improvement measures, and strict promotional management. Looking ahead to 2026, TINGYI's management reiterated that improving profit margins will be the core focus, while also hoping to restore revenue growth trajectory and continue to promote efficiency improvement measures. The company typically locks in procurement of various categories of raw materials for half a month to several months.

The bank indicated that in the third quarter of 2025, TINGYI's beverage business remains under pressure during the peak season, while instant noodles have resumed positive growth since July, and this trend is expected to continue in the future. In October, the quarterly decline in non-carbonated beverage sales narrowed, mainly benefiting from base effects and warmer weather; carbonated beverages have maintained positive growth so far in the third quarter, but the growth rate has slowed compared to the first half of the year. On the other hand, the cost trend remains favorable: the gross margin of the beverage business and overall profitability benefit from favorable costs, offsetting the impact of declining revenue. In the instant noodle business, palm oil costs rose 10% year-on-year in the third quarter, and remained roughly flat in October, which has eased compared to the first half of the year, coupled with price increase measures starting in 2024, driving gross margin expansion in 2025 and the second half of the year.

Goldman Sachs pointed out that TINGYI's management stated that during the peak season, there were no large-scale promotions in the beverage business (although some channels increased investment to cope with fierce competition), but if sales remain sluggish in 2026, they may reconsider the pricing strategy for large-pack beverage SKUs (which have been raised since April last year). The company actually believes that future cost inflation in beverages and noodles may benefit its pricing strategy, as price increases have been continuously implemented since 2024. Goldman Sachs gives TINGYI a "Buy" rating with a target price of HKD 12.7