Tingyi's 1H26 sales and profit progress broadly in line with expectations

Overview

This report is Morgan Stanley's company research and conference takeaways on Tingyi (Cayman Islands). The key feedback is that 1H26 sales and profit progress was broadly on track. The company is expected to achieve low-single-digit sales growth and positive earnings growth in 1H26. Management maintained its full-year sales guidance but did not provide earnings guidance due to limited visibility on raw-material prices.

Core views

The core views are: first, the instant noodle business continued to outperform beverages and is expected to maintain relatively stable low-single-digit growth in both 1H26 and 2H26, mainly supported by market share recovery and volume growth; second, beverage sales remained positive but growth slowed from May to June, with tea as the main driver while juice, water, and carbonated beverages faced pressure; third, competition in the beverage industry remained intense, particularly in sugar-free tea and electrolyte water; fourth, PET costs created pressure in 2Q26, and the company has leaned more toward spot purchasing since May, with safety inventory of approximately 2 to 3 weeks; fifth, the company continued to expand into new channels such as snack discount chains and membership stores, using channel-customized products to maintain healthy margins.

Analysis framework

The report evaluates the company's fundamentals by combining management communication feedback, operating trends by business segment, cost changes, channel strategy, and a DCF valuation framework. The rating and target price are based on Morgan Stanley's ModelWare framework and DCF methodology, with reference to the company's long-term growth prospects, margin improvement, capital returns, and risk factors.

Methodology notes

• Valuation methodsDCF

  Discounted cash flow valuation

  Morgan Stanley uses DCF as the base-case valuation methodology to reflect the company's long-term growth prospects. Key assumptions include an 11.1% WACC and a 2% perpetual growth rate.

• Research modelMorgan Stanley ModelWare

  Internal institutional financial forecasting framework

  Unless otherwise stated, most metrics in the report are based on the Morgan Stanley ModelWare framework, with some data representing consensus expectations or Morgan Stanley Research estimates.

Asset mapping & comparison

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

• 00322.HK

  Covered security

  Strengths

  1H26 sales and earnings were in line with guidance; instant noodle market share recovery and volume growth; the company maintained its 100% payout ratio; new-channel expansion helps cover consumption scenarios such as snack discount chains and membership stores.

  Weaknesses

  Beverage growth slowed from May to June, while juice, water, and carbonated beverages faced pressure; competition in sugar-free tea and electrolyte water remained intense; raw-material price visibility was limited.

  Comparison

  The instant noodle business outperformed beverages. The Equal-weight rating means that risk-adjusted total returns over the next 12 to 18 months are expected to be broadly in line with the industry coverage universe.

  Risks

  PET and other raw-material costs remain elevated, the beverage price war intensifies, consumption slows, and price increases are not passed through as expected.

Key data

• Stock ratingEqual-weightThe rating date is shown as 2025-07-25. Under Morgan Stanley's relative rating system, this indicates that total returns over the next 12 to 18 months are expected to be broadly in line with the average level across the industry coverage universe.
• Industry viewIn-LineThe industry coverage is China/Hong Kong Consumer.
• Target priceHK$13.50The target price history shows 13.5 on 2026-04-13; the report table lists the target price as HK$13.50.
• Closing priceHK$11.06As of 2026-07-10 GMT, denominated in HKD.
• Target price upside22%Based on the upside from the closing price to the target price disclosed in the report table.
• 2026e revenueRmb 81,362mnFiscal year ending 12/26e; net revenue forecast.
• 2026e EPSRmb 0.79 / Rmb 0.78The table presents consensus EPS and Morgan Stanley's estimated EPS, respectively.
• 2026e EBITDARmb 10,835mnFiscal year ending 12/26e.
• 2026e dividend yield8.2%Dividend yield forecast disclosed in the report table.
• Dividend policy100% dividend payout ratioThe company will maintain a 100% dividend payout ratio.

Impact & implications

The report has a broadly neutral investment implication: fundamentals have not materially deviated from prior expectations, while the target price's implied upside and high payout ratio provide some support. However, the Equal-weight rating indicates limited certainty of excess returns relative to the sector. Investors should focus on the beverage price war, PET and other raw-material costs, instant noodle market share recovery, and whether new-channel expansion can deliver sustained margin improvement.

Risks

• Raw-material costs remain elevated, particularly PET costs.
• Competition in the beverage business is intense, with the risk of a price war.
• Slowing consumption may weigh on volume and revenue growth.
• Pricing pass-through or product-mix improvement falling short of expectations may pressure margins.

What to watch

• Whether instant noodles maintain stable low-single-digit growth in 2H26.
• Whether tea growth can offset pressure on juice, water, and carbonated beverages.
• The impact of PET spot prices and the company's spot-purchasing strategy on gross margins.
• Volume growth and margin performance in new channels such as snack discount chains and membership stores.
• Whether management updates its earnings guidance after raw-material visibility improves.