Haitian Earnings: Input Costs Tailwind and Channel Transitions Drive Results; Retain Fair Value

Wide-moat Foshan Haitian Flavouring and Food’s second-quarter results were decent with net profit growing 11% year on year. The company benefited from lower raw material costs and improved sales due to efforts in channel and product diversification. Although Haitian cycled an easy comparison, we think the results are a constructive sign that the company has delivered progress in transitioning its products and channel exposure to meet increasingly diversified demand for condiment products, further supporting its wide moat rating. We retain our forecasts and fair value estimate of CNY 42 per share, which implies 38 times 2024 price/earnings, 27 times enterprise value/EBITDA, and 1.8% dividend yield.