Yanghe Is Back on Growth Trajectory, Maintaining FVE at CNY 170 per Share

Wide-moat Yanghe’s decent third-quarter results were largely in line with our expectations, which signal the company is ready to accelerate its growth following a few quarters’ efforts on consolidating its distribution channels and restructuring its management and sales team. Third-quarter revenue and recurring net profit rose 17% and 23% year over year, respectively, and the cumulative nine-month recurring net profit was 4.9% higher than the pre-pandemic level in the third quarter of 2019. We maintain our full year revenue and net profit forecasts, as well as our five-year net profit CAGR assumption of 11.5% through 2025, with accelerating sales of the flagship premium product Dream M6+ the key growth driver. Our fair value estimate of CNY 170 per share is intact, and we think the shares are fairly valued presently.