Who is Behind Hai Di Lao? Unveiling the Business Legend of Yihai International.

Hai Di Lao is a well-known name to many, having become a leader in the hot pot industry thanks to its excellent service, fresh ingredients, and unique dipping sauce recipes. Yihai International, the major supplier of Hai Di Lao’s soup bases (01579.HK), stands as a leader among leaders, with a current market capitalization of HKD 17.852 billion.

The financial report shows that in 2023, Yihai International achieved an annual revenue of RMB 6.148 billion and a net profit of RMB 907 million, reflecting a year-on-year growth of 11.2%. In terms of product types, hot pot seasoning alone contributed 66.5% of the company’s revenue. Renowned food industry analysts suggest that compound seasonings are undoubtedly the future direction of this industry:

“As the new generation becomes the main consumer group, the demand for compound seasonings is increasing. The B-end demand from restaurants for compound seasonings is also continuously rising… The personalized sector of compound seasonings will certainly grow.”

According to a research report by iiMedia Research, the market size of China’s compound seasoning market was approximately RMB 158.8 billion in 2021, and it is expected to reach RMB 336.7 billion by 2027, with a compound annual growth rate of about 13.3%. This growth rate is significantly higher than that of the overall seasoning industry, indicating that it is a highly potential track in the consumer field.

In the Hong Kong stock market, Yihai International (01579.HK) is highly regarded for its leading position in the seasoning industry. Originating as a hot pot base manufacturer and gradually evolving into a diversified seasoning company, Yihai International not only holds a significant position in the domestic market, but its brand influence and product strength are also gradually spreading globally.

Next, we will conduct an in-depth analysis of Yihai International’s market performance, financial status, product innovation, and channel expansion to provide more comprehensive information for investors’ investment strategies.

Market Performance: Steadily Growing Seasoning Giant

Since its listing, Yihai International has achieved steady performance growth through its deep cultivation in the hot pot seasoning market. According to the latest financial report, the company’s revenue for 2023 reached RMB 6.148 billion, a 6% decline from the previous year, while net profit was RMB 853 million, reflecting a year-on-year growth of 11.2%. This achievement is particularly valuable against the backdrop of a gradually recovering consumer market, demonstrating Yihai International’s competitiveness and profitability in the seasoning industry.

Financial Status: Healthy Financial Foundation

Yihai International’s financial report shows that as of 2023, the company’s P/E ratio (TTM) was 16.060, P/B ratio was 2.842, EPS was RMB 0.875, and net asset per share was RMB 4.65. Despite the revenue drop due to rising raw material costs and market demand fluctuations, the company still achieved a higher EPS than analysts expected through strict cost control and operational efficiency improvements.

Regarding market reactions:

• Following the release of the annual results in March 2023, the stock price dropped by 17% due to declining revenue.
• In September, the CEO’s stock purchase boosted market confidence, leading to a price rebound.
• From November, with improving market sentiment, the stock price saw a slight recovery.

Overall, Yihai International has maintained relatively stable profitability through internal management optimization despite revenue pressure. However, the market remains cautious about its long-term growth potential. In the future, the company needs to further enhance its market share and product competitiveness to address industry challenges and achieve sustainable growth.

Product Innovation: Continuously Driving Product Strength

Over the past year, Yihai International has launched a total of 26 new products across three major series: soup bases, dipping sauces, and compound seasonings. These new products have positively impacted the company’s profitability and stock price.

Firstly, these new products have helped the company expand its market share, attracting more consumers and diversifying revenue sources. The innovation and variety of new products meet the ever-changing taste demands of consumers, enhancing brand loyalty.

Secondly, the successful launch and market popularity of these new products have boosted investor confidence in the company, leading to a short-term increase in stock price. In September 2023, the stock price rose by 8% following the release of new products, reflecting the market’s positive expectations of the profitability of these new offerings.

Overall, the introduction of new products has laid the foundation for future profitability growth. However, the company still needs to continuously innovate and optimize its product structure to maintain competitiveness and market position.

Channel Expansion: Deepening the Sales Partner Mechanism

In 2023, Yihai International actively implemented channel expansion strategies, such as the sales partner mechanism. This mechanism allows the company to establish closer cooperation with distributors and retailers, thereby more effectively bringing products to market. This strategy not only improves distribution efficiency but also enhances channel flexibility and response speed, enabling the company to adapt more quickly to changing market demands, significantly increasing market coverage and sales efficiency.

Additionally, the company has expanded its online sales channels, promoting products through e-commerce platforms and social media to attract more young consumers. This expansion of online channels has increased brand exposure and sales, effectively compensating for the limitations of traditional channels.

In terms of revenue, despite a 6% annual decline, from HKD 6.5 billion to HKD 6.1 billion, the expansion of new channels partially offset this negative impact, contributing positively to revenue growth by increasing market penetration and product sales.

In terms of stock price, the successful implementation of channel expansion strategies boosted market confidence. Following the company’s announcement of expanding the sales partner mechanism, the stock price rose by about 8% in the short term, reflecting investors’ optimism about the company’s future revenue growth potential.

Moreover, the growth of online channel sales has enhanced investors’ confidence in the company’s digital transformation, further driving up the stock price.

In summary, through channel expansion and the sales partner mechanism in 2023, Yihai International successfully increased market coverage and distribution efficiency, partially mitigating the pressure of overall revenue decline and boosting investor confidence, leading to a rise in stock price.

Future Outlook: Internationalization and Brand Diversification

Looking ahead, Yihai International has a clear development strategy. The company will continue to leverage its strong product and brand influence, supported by advanced supply chain management and technological innovation, to upgrade products and services. This will enable it to meet customer demands more effectively in the gradually recovering global consumer market, enhancing its market competitiveness.

Meanwhile, Yihai International is actively expanding into international markets. By thoroughly researching and adapting to consumer preferences in different regions, the company adjusts the taste, appearance, and packaging of its overseas products. To this end, a dedicated overseas product development team has been established to better understand and integrate cultural elements and dietary habits from various regions, thereby developing more attractive localized products and promoting brand diversification.

These efforts will not only enhance the acceptance of products in international markets but also promote the global recognition and market expansion of the company brand. Through these strategic initiatives, Yihai International aims to establish a more robust global business framework, enhancing its long-term sustainable development capabilities. The company also plans to strengthen relationships with international partners, exploring new market opportunities through mutual cooperation to address global market challenges and changes.

Investment Advice

Considering Yihai International’s steady financial performance, strong brand advantage, and continuous growth, it is a noteworthy investment target. However, investors should also pay attention to the following points:

• Market Competition: With the continuous expansion of the compound seasoning market, competition is intensifying. Yihai International needs to continuously innovate to maintain its market position.
• Raw Material Price Fluctuations: As a food production company, fluctuations in raw material costs can affect profit margins.
• Macroeconomic Environment: Economic slowdown or a decline in consumer confidence could impact the company’s sales.

Based on the above analysis, it is recommended that investors closely follow Yihai International and make investment decisions considering personal investment goals and risk tolerance. Investors can open a brokerage account through traditional U.S. stock brokers such as Interactive Brokers, Charles Schwab, or Tiger Brokers. The process is simple, and once approved, investors can log in and trade U.S. and Hong Kong stocks.

Alternatively, investors can choose new multi-asset trading platforms like BiyaPay, which allows real-time trading of U.S. and Hong Kong stocks by simply topping up digital currency (such as USDT). If investors already have other brokerage accounts, the platform also supports exchanging digital currency for USD or HKD, which can then be deposited into overseas bank accounts, facilitating quick and unlimited fund transfers.