Core Viewpoint - The report from China Merchants Securities maintains a "strongly recommended" rating for Yihai International (01579), highlighting performance improvement and attractive dividends as key points, with expectations for a high dividend payout ratio in the future [1] Group 1: Performance Improvement and Dividends - The company's core highlights are performance improvement and high dividends, with previous price reductions from related party businesses having constrained performance and valuation, but this pressure is expected to ease [1] - The company is anticipated to maintain a high dividend payout ratio starting in 2023, with expected earnings per share (EPS) of 0.81 and 0.88 yuan for 2025 and 2026 respectively, corresponding to a valuation of 15X in 2026 [1] - The expected dividend yield for 2025 and 2026 is projected to exceed 6%, with a target valuation of 22X for 2026, leading to a target stock price of HKD 21.5, representing a 44% upside [1] Group 2: Revenue and Profitability Insights - For the second half of 2025, the company expects low single-digit revenue growth, with improvements in gross sales margin due to increased factory prices and enhanced channel support for distributors [2] - The company is also expected to improve supply chain efficiency, contributing positively to gross margins, while a one-time tax payment in 2024 is projected to lead to a profit release of around 50 million yuan in 2025 [2] Group 3: Third-Party Business Growth - The third-party business is stable, with significant growth expected in B-end and overseas markets, particularly in Southeast Asia, South America, Africa, and the Middle East [3] - The B-end revenue is projected to double in 2025, driven by deepening cooperation with key clients and the establishment of a small B-end team aiming to optimize product offerings [3] Group 4: Related Party Business Improvement - The return of Haidilao's founder, Zhang Yong, is expected to boost morale and management within the company, with a focus on enhancing the quality of products supplied to Haidilao [4] - The association with Haidilao is anticipated to improve Yihai's related party business, with expectations for increased gross margins and supply volumes as the restaurant sector recovers [4]