Western Securities initiates coverage on YIHAI INTL with a "Buy" rating, citing attractive dividend returns

The research report from Western Securities points out that YIHAI INTL (01579.HK) initially enjoyed a growth valuation premium, but subsequently, HAIDILAO (06862.HK) experienced store closures, YIHAI's related party revenue fluctuated, and the industry's growth was below expectations, leading to a decline in valuation from its peak. During this period, YIHAI INTL's capital expenditure entered a downward cycle, increasing the dividend payout ratio, and the market's pricing logic for the company shifted from a high-growth target to a low-valuation, high-dividend company.

In the long term, Western Securities believes that the base material and compound seasoning industries still have growth potential and are not just a stock market. In 2025, related party sales will be affected by the decline of HAIDILAO, but currently, the number of HAIDILAO stores has stabilized, and with a low base, turnover is expected to improve next year, with related party revenue expected to stabilize and improve. Third-party business prices are under pressure, but improvement is expected next year, with steady sales growth. It is anticipated that from 2025 to 2027, the revenue from hot pot seasonings will grow by 0.1%, 5.7%, and 5% annually. The revenue from convenient fast food is expected to decline by 2.9%, recover by 2.4%, and continue to grow by 5.4%. Revenue from compound seasonings is expected to grow by 6.9%, 11.3%, and 8.7% annually.

Western Securities also noted that the company's cash dividends are proactive, and the dividend return is attractive. It forecasts that from 2025 to 2027, the company's revenue will be RMB 6.57 billion, RMB 6.96 billion, and RMB 7.38 billion, with annual growth rates of 0.5%, 5.9%, and 6%, respectively. During the same period, the net profit attributable to the parent company is expected to be RMB 800 million, RMB 890 million, and RMB 980 million, with annual growth rates of 8.8%, 10.3%, and 10.2%, respectively, initiating coverage with a "Buy" rating