Goldman Sachs reiterates Buy on Yihai International: third-party sales continue double-digit growth, margins supported by efficiency and scale

Overview

This report is Goldman Sachs' meeting notes on Yihai International following the 2026 APAC Consumer & Leisure Corporate Day. The core conclusion is that third-party sales continue to deliver double-digit growth, while compound seasonings, hotpot soup base, and convenience foods all achieved positive growth. Overseas, large-B, KA direct supply, and emerging channels remain the main sources of incremental growth. Management continues to target double-digit full-year revenue growth in 2026 and believes margins can be supported by efficiency gains, scale effects, and cost control.

Core views

Goldman Sachs believes Yihai International's third-party business momentum remains solid, while the related-party business is also seeing incremental demand from new Haidilao businesses. Despite volatility in packaging material costs, non-operating income, and FX losses, 1H26 gross margin and operating margin are still expected to improve year over year, and margin pressure in 2H appears more manageable than previously feared. The report reiterates a Buy rating with a target price of HK$19.0.

Analysis framework

The report is mainly based on management discussions during the corporate day, providing qualitative and quantitative analysis around channels, product categories, related-party sales, margins, expenses, overseas expansion, and shareholder returns, and supports the 12-month target price using a target P/E valuation method.

Methodology notes

• Valuation methodsTarget P/E valuation method

  17x 2027E average P/E discounted to end-2026

  Goldman Sachs maintains a Buy rating on Yihai International with a 12-month target price of HK$19.0, based on 17x 2027E average P/E, discounted to the end of 2026 at a cost of equity of 10.6%.

• Factor frameworkGS Factor Profile

  Growth, financial returns, valuation multiples, and composite percentiles

  Goldman Sachs' disclosed factor framework compares stocks against the market and industry peers using indicators such as future sales, EBITDA, EPS, ROE, ROCE, CROCI, and valuation multiples.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Yihai International Holding (1579.HK)

  Covered company in the report

  Strengths

  Third-party sales maintain double-digit growth, with incremental contribution from KA direct sales and distribution, overseas 2B, large-B, and emerging channels; margins are supported by raw materials, cost control, manufacturing efficiency, and scale effects; the company is committed to maintaining a high payout.

  Weaknesses

  Some convenience food price bands are still recovering, with the Rmb30 price range still in a bottoming phase; non-operating income, FX losses, and packaging material costs may create earnings volatility.

  Comparison

  The report states the company is currently trading at 11.6x/10.4x 2026/27E P/E, versus 2026-28E earnings CAGR of 9%, and offers dividend yields of 8.6%/9.6%.

  Risks

  Negative sentiment around prepared dishes, intensifying competition in compound seasonings, further slowdown in related-party sales, raw material cost volatility, overseas execution risks, and food safety issues.

Key data

• Report date2026-06-29The document date is 20260629.
• RatingBuyThe report explicitly states a reiterated Buy.
• 12-month target priceHK$19.0The target price is based on 17x 2027E average P/E discounted to end-2026.
• Current priceHK$13.02Company-specific disclosure lists Yihai International Holding's price as HK$13.02.
• Implied upside约45.9%Calculated based on target price of HK$19.0 and current price of HK$13.02, excluding dividends.
• 2026/27E P/E11.6x/10.4xValuation level shown in the report's bottom-line summary.
• 2026/27E dividend yield8.6%/9.6%Dividend yield shown in the report's bottom-line summary.
• 2026-28E earnings CAGR9%The report compares this earnings CAGR against the valuation.
• Third-party sales momentumDouble-digit growth year to dateDomestic KA, overseas, and domestic B2B all posted double-digit growth.
• Large-B business target20%~30% growthManagement said the large-B business is tracking its full-year growth target.
• Overseas 2B target2026E growth of over 30%Long-term growth comes from penetration in Southeast Asia, the United States, and mainstream supermarket/CVS channels in Japan and South Korea.
• Related-party gross marginApproximately 14%~15%Management expects related-party gross margin to remain stable.
• Thailand plant capacity utilization target30%About double the 2025 level, supporting margin improvement overseas.

Impact & implications

If management guidance is delivered, Yihai International's investment case will be supported by expansion in third-party channels, recovery in related-party demand, margin improvement, and a high payout. The current valuation corresponds to 2026/27E P/E of 11.6x/10.4x, while also offering dividend yields of 8.6%/9.6%, leading the report to view the risk-reward as still favorable.

Risks

• Negative sentiment or worsening public opinion related to prepared dishes.
• Intensifying competition in the compound seasonings market.
• Further slowdown in related-party sales.
• Greater-than-expected or above-forecast volatility in raw material costs, especially packaging materials.
• Underperformance in overseas market execution.
• Food safety issues arising in the supply chain, transportation, or production processes.
• Uncertainty in the timing of non-operating income and FX loss volatility caused by foreign-currency balance sheet exposure.

What to watch

• Whether third-party sales can continue to maintain double-digit growth in subsequent quarters.
• The pace of KA direct sales and distribution rollout and the contribution of a higher KA direct sales mix to operating margin.
• Whether the large-B business can achieve its full-year growth target of 20%~30%, and whether the small-B business can continue accelerating off a low base.
• Whether the overseas 2B business can achieve growth of over 30%, especially through channel penetration in Southeast Asia, the United States, Japan, and South Korea.
• The trend of packaging materials and PET prices in 2H26, and whether manufacturing process optimization and faster channel turnover can offset cost pressure.
• The boost to demand for compound seasonings from new related-party businesses such as food delivery.
• Whether the high payout commitment can continue, especially relative to the approximately 100% payout level in 2H25.
• Whether the Rmb30 price band in convenience foods has indeed bottomed out and rebounds as management expects.