Core Viewpoint - The report from China Merchants Securities maintains a "strongly recommended" rating for Yihai International (01579), highlighting performance improvement and high dividends as key attractions. The company is expected to benefit from positive changes in related party transactions and continued double-digit growth in third-party business, particularly in overseas and B-end markets [1] Group 1: Performance and Dividends - The core highlights for the company are performance improvement and high dividends. Previously, the decline in related party business prices constrained performance and affected valuation, but this obstacle is expected to improve. The company has initiated high dividends starting in 2023, with future dividend rates expected to remain high [1] - The estimated EPS for 2025 and 2026 is projected to be 0.81 and 0.88 yuan, respectively, with a corresponding valuation of 15X for 2026. The dividend yield for both years is expected to exceed 6%, driven by restaurant recovery and improvements in related party transactions [1] Group 2: Revenue and Profitability - For the second half of 2025, the company anticipates low single-digit revenue growth, with improvements in gross sales margin due to increased factory prices and enhanced channel expenses to support market demand. The overall profit growth is expected to exceed 20% [2] - The company is focusing on improving supply chain efficiency, which is expected to positively impact gross margins. A one-time payment of historical dividend prepayment taxes in 2024 will lead to a higher tax rate, but the tax rate is expected to normalize in 2025, releasing approximately 50 million in profits [2] Group 3: Third-party Business Growth - The third-party business is stable, with significant growth in B-end and overseas markets. The company is reforming direct channels to recover profits and has successfully partnered with major retailers like Hema and Dingdong Maicai. The overseas business is expanding rapidly, particularly in Southeast Asia, with a dual-brand strategy [3] - The B-end revenue is expected to double in 2025, primarily driven by partnerships with key clients. The company plans to enhance the profitability of the B-end by optimizing product offerings and reducing reliance on distributors [3] Group 4: Related Party Business Improvement - The return of the founder of Haidilao is expected to boost morale and management within the company, leading to improved related party business. The founder's emphasis on quality management and new brand development is anticipated to benefit Yihai as a supplier [4] - As the overall demand in the restaurant sector recovers, the gross margin and supply volume of Yihai's related party business are expected to improve [4]