Investment Rating - The report assigns a "Buy" rating to the company with a target price of HKD 18.00, compared to the current price of HKD 14.10 [1] Core Views - The company is poised for a turnaround after a period of underperformance, with industry competition becoming more rational and its leading position solidified [1] - The company and its affiliate, Haidilao, significantly increased their dividend payout ratio to 90% in 2023, supported by ample capacity, low capital expenditure, and strong cash flow [1] - The compound seasoning market remains a high-growth sector, with both hotpot seasoning and Chinese-style compound seasoning in the growth and penetration phase [2] - The ready-to-eat food market, particularly self-heating products, has slowed down after rapid growth, but opportunities exist in new product categories and channels [2] - The company is expected to benefit from affiliate growth, product quality-to-price ratio improvements, incentive model reforms, and multi-channel expansion in 2024 [2] Company Overview - The company has experienced significant growth phases, including a 15x stock price increase from 2016 to 2019, followed by a period of underperformance from 2020 to 2022 [1][11][12] - In 2023, the company's hotpot seasoning and Chinese-style compound seasoning categories resumed growth, while ready-to-eat food remained a drag due to high base effects [12] - The company's product structure is dominated by hotpot seasoning (67% of total revenue), followed by ready-to-eat food (23%) and compound seasoning (10%) [20] - The company's channel structure is shifting towards third-party sales, which accounted for 67% of total revenue in 2023, up from 44% in 2013 [22] - The company has a balanced regional presence, with 50% of revenue from South China, 44% from North China, and 6% from overseas markets [24] Industry Analysis - The compound seasoning market in China is expected to reach RMB 203.2 billion in 2023, accounting for 34% of the total seasoning market [27] - The compound seasoning market is still in the growth phase, with hotpot seasoning and Chinese-style compound seasoning being the key growth drivers [27] - The ready-to-eat food market in China exceeded RMB 200 billion in 2022, with instant noodles being the dominant category, while self-heating products have entered a slowdown phase [43] - The food processing and catering industries are the main consumption scenarios for compound seasoning, with catering being the core driver of short-term growth [29][32] Future Outlook - The company is expected to benefit from Haidilao's store expansion and overseas growth, with a projected 10% CAGR in affiliate hotpot seasoning revenue over the next three years [53] - The company plans to focus on B2B and online channels for third-party sales, with Chinese-style compound seasoning and hotpot seasoning being the key growth drivers [58] - The company is undergoing organizational reforms, including changes to its product project system and channel incentive policies, to improve responsiveness and stimulate growth [60][62] - The company's profitability is expected to remain stable, with a focus on revenue growth and capacity utilization [63]
颐海国际：走出低谷，改革蓄力