Tingyi reported 1Q17 results after market close today
1Q17 revenue increased 3.7% YoY to Rmb14,198m, 2.6% ahead of our estimate. Net profit increased 15.3% YoY to Rmb434m, which is also 2.6% ahead of our estimate. The company also changed presentation currency from USD to RMB starting from 1Q17.
- Instant noodles gradually improving. 1Q17 noodle revenue increased 5.8% YoY to Rmb5,811m. According to AC Nielsen, Tingyi maintained its market-leading position with market share of 44.5% and 51.2% in sales volume and value but saw 1.3ppt and 0.7ppt QoQ market-share gains, respectively. Furthermore, segment gross profit margin contracted 0.8ppt YoY to 27.8% largely due to higher palm oil and flour prices. On the net profit level, the segment recorded a 23.6% YoY increase to Rmb393m amid a revenue growth recovery and improving product mix.
- Beverages still saw positive YoY revenue growth amid low season. Beverage revenue increased 2.8% YoY to Rmb7,982m, as 1Q is traditionally low season for beverages. Segment gross profit margin contracted 5.1ppt YoY to 28.2%, largely due to headwinds from higher prices for raw materials such as sugar, PET resin, etc. As such, the segment's net profit declined 56.7% YoY to Rmb75.8m.
- Good cost-control efforts; narrowing instant food loss. During the quarter, the OPEX-to-sales ratio decreased 2.7ppt YoY to 23.7%. In particular, distribution expense % saw the biggest decrease, at 1.9ppt. As highlighted earlier, we believe irrational competition is easing off as the industry moves towards a healthier competitive environment with a key focus on consumption upgrades. Being a market leader, Tingyi should be able to well control its OPEX spending, in our view. 1Q17 instant food revenue declined 5.8% YoY to Rmb219m, mainly due to early customer stocking from an earlier CNY this year. Thanks to effective cost-control efforts from distribution and administration expenses, segment losses narrowed from the Rmb20.6m loss incurred in 1Q16 to Rmb4.2m in 1Q17.