China International Capital (CIC) has released a research report stating that, considering the easing of raw material price increases, it has raised its 2026/2027 profit forecasts for Tingyi (ASX: 00322) by 6%/6% to RMB 4.49 billion / RMB 4.87 billion. This corresponds to a 12/11 times 2026/2027 P/E ratio. The target price has been raised by 5% to HK$14.7, corresponding to a 16/14 times P/E ratio and a 31% upside potential.

The institution expects the company's first-half 2026 revenue to increase by a low single-digit percentage year-on-year, with noodle performance outpacing beverages. Net profit is expected to grow by a low-to-mid single-digit percentage, while adjusted net profit is forecast to grow by a double-digit percentage, benefiting from favorable cost conditions. CIC's main views are as follows:

First-Half 2026 Revenue Shows Stability, Instant Noodle Market Share Stabilizes Sequentially

The institution expects Tingyi's first-half 2026 instant noodle revenue to grow by a low single-digit percentage year-on-year. Since last July, the company's instant noodle market share has maintained a sequential improvement trend. According to Nielsen data, the first-quarter 2026 instant noodle market share was flat sequentially, with categories like non-fried noodles, tomato flavor, turkey-flavored noodles, and Guizhou red sour soup performing notably well.

The institution expects beverage revenue in the first half of 2026 to achieve positive year-on-year growth, albeit slower than instant noodles, affected by heavier-than-usual rainfall in the second quarter, which slightly slowed sales momentum compared to the first quarter. The tea category is expected to perform better, primarily benefiting from promotional activities like prize scans for products such as green tea launched in the first half. Carbonated drinks and juice faced pressure. Overall, beverage performance remained stable despite intensified competition and adverse weather impacts this year, reflecting the company's relatively solid beverage foundation.

First-Half 2026 Gross Margin Expected to Improve Year-on-Year, Net Profit Delivery Positive

The institution expects the company's first-half 2026 gross margin to improve slightly year-on-year. Instant noodles benefit from improved scale effects and a slightly favorable composite raw material price environment. Although PET prices rose significantly in the second quarter, the company locked in low-price inventory until May, switching to market-price procurement thereafter. The institution expects the impact from PET prices to be more pronounced in June-July, yet the overall first-half 2026 beverage gross margin is still expected to improve year-on-year.

The institution expects the first-half 2026 SG&A expense ratio to remain stable. The company's "five-code-in-one" promotional activity involved only a few categories, with restrained marketing spending. Adjusted net profit is expected to grow by a double-digit percentage year-on-year, and reported profit is also expected to deliver positive year-on-year growth as anticipated.

Cost Pressure Better Than Previously Expected, High Dividend Yield Highlights Investment Value

Current PET prices have fallen to RMB 6,982 per ton, below this year's high of RMB 9,191 per ton. Consequently, the institution expects pressure on beverage gross margins to ease significantly after July. The company is expected to offset this through scale effects, cost reduction, and efficiency improvements. At current cost levels, cost pressure in the second half of 2026 may be relatively manageable.

The institution expects the company's revenue in the second half of the year to maintain steady year-on-year growth. Considering that instant noodle profit margins are expected to maintain a slight year-on-year growth trend, full-year profit is expected to remain stable year-on-year. The company's fundamentals are solid, and at the current price level, it offers an attractive dividend yield of 8.2%, highlighting its defensive investment value.

Risk factors include weak demand, intensified competition, and raw material price volatility.