On November 13, food and beverage giant Tingyi released its Q3 2017 performance report. During the reporting period, the company achieved net profit growth of nearly 40% year-on-year, surpassing the industry growth rate, highlighting the benefits of its transformation. In the view of industry insiders, Tingyi's performance is closely linked to the multiple measures it has implemented. At present, Tingyi has taken the lead in emerging from the industry downturn, and the company's internal adjustment period has ended. Net profit in the first three quarters increased by over 30% year-on-year According to Tingyi's financial report for the first three quarters of 2017, during the reporting period, the company achieved revenue of 48.254 billion yuan, a year-on-year increase of 5.91%; profit of 2.763 billion yuan, a year-on-year increase of 33.87%; and net profit of 1.938 billion yuan, a year-on-year increase of 37.91%. In the third quarter, the company's revenue increased by 8.49% year-on-year to 19.687 billion yuan, and net profit increased by 29.98% year-on-year to 1.238 billion yuan. From the data of the company's two main businesses, in the first three quarters of this year, both the instant noodle and beverage businesses saw year-on-year growth. Among them, the instant noodle business achieved revenue of 16.979 billion yuan, a year-on-year increase of 2.5%; the beverage business revenue increased by 7.96% year-on-year to 30.105 billion yuan. In the third quarter, benefiting from optimized product mix and increased sales volume, Tingyi's instant noodle business achieved revenue of 6.707 billion yuan, a year-on-year growth of 3.79%, and net profit of 626 million yuan, accounting for 34.07% of Tingyi's total Q3 revenue; benefiting from sales growth and reduced advertising expenses, Tingyi's Q3 beverage business revenue reached 12.569 billion yuan, a year-on-year increase of 11.13%, accounting for 63.84% of its total revenue, with net profit increasing by 51.17% year-on-year to 692 million yuan. According to Nielsen data, in Q3 2017, the overall instant noodle market volume grew by 3.3% and sales value grew by 6.9%, showing a trend of product structure upgrading. Among them, in Q3 2017, Tingyi's instant noodle market share by volume was 44.2%, and by sales value was 50.3%, firmly maintaining its market leadership. In beverages, the announcement showed that Tingyi's beverage revenue in Q3 was 12.5686 billion yuan, up 11.13% year-on-year, accounting for 63.84% of the group's total revenue. Ready-to-drink tea products held a market share of 51.4% by sales volume, continuing to rank first in the market. Tingyi's juice brands and Pepsi's Tropicana brand held a combined market share of 20.2% by sales volume, ranking first in the market. Packaged water held a market share of 15.4%, temporarily ranking third in the market. Regarding the company's performance in the first three quarters, Tingyi stated in its Q3 report that in Q3 2017, the overall food and beverage industry developed steadily, but raw material prices remained high, and companies would continue to face pressure in the short term. At the same time, Tingyi also stated that in the face of various external uncertainties, the company will continue to implement the following prudent strategies: cash is king and prudent capital expenditure control, promoting asset revitalization; focusing on evergreen and specialty products, while consolidating market share through a multi-price-band strategy and steadily promoting product upgrades; strengthening brand building and diversifying channel layout; and strengthening food safety construction through strict internal and external monitoring. Yesterday, a Tingyi representative told the Securities Daily reporter that China's food and beverage industry still faces issues such as short-term raw material cost increases, industrial upgrading, and rapid changes in consumer demand. On the issue of profit pressure, the Tingyi Group proposed three rationalizations: rationalization of supply chain configuration, rationalization of distributor channel layout, and rationalization of organizational design and expenses. Since the implementation of the three rationalizations, initial results have been achieved, and the company's performance has steadily improved. The three rationalizations will become the strategy that Tingyi will adhere to this year. Has Tingyi's adjustment period passed? It is worth noting that although Tingyi's Q3 report showed good performance in major financial indicators, the company also mentioned issues such as rising raw material costs and declining gross margins. According to the company's Q3 report data, affected by rising prices of major raw materials such as sugar, PET pellets, and paper materials, the Q3 gross margin decreased by 0.94 percentage points year-on-year to 32.50%. In response, a Tingyi representative told the Securities Daily reporter that in the future, the company will continue to gradually reduce the scale of interest-bearing borrowing through its own funds, aiming to achieve a more flexible and healthy financial structure and further improve its operational foundation. Regarding Tingyi's Q3 performance, Zhu Danpeng, an analyst at China Food Industry, told the Securities Daily reporter that Tingyi's Q3 performance is inseparable from the company's top-level design, product structure adjustment, and marketing strategies. Zhu Danpeng said that from a macro perspective, Tingyi has shed many burdens in asset revitalization, focusing more on product innovation and marketing; at the same time, the stability of the senior management team provides good support for the company's growth. In addition, the company's cooperation with China Aerospace has not only enhanced the company's brand image but also provided a strong endorsement for product safety. In terms of product structure adjustment, new products are very down-to-earth and have established effective communication with consumers. According to the Securities Daily reporter, this year marks the 25th anniversary of the Tingyi brand. During this year, Tingyi has launched multiple initiatives, and the effects of these initiatives are reflected in the company's financial report. At that time, Tingyi sold five non-core beverage production plants to reduce the time risk of asset investment, thereby shifting the company's core resources to the upstream and high value-added end of the industrial chain, improving capital turnover efficiency. In terms of brand building, Tingyi, as a national brand, has also begun to move boldly toward internationalization. While leveraging the Olympics, NBA, and international marathon events for brand marketing, the company also actively participates in the "Belt and Road" initiative. Now, Tingyi has also joined hands with China Aerospace. On September 5 this year, Tingyi and the China Aerospace Foundation held a cooperation award ceremony in Beijing; not long ago, Tingyi newly completed the "Dream Exploration Park" in Tianjin, which is a food safety and aerospace science education base built by Tingyi. On November 9, Tingyi held the "Remembering the Source, Creating Brilliance Again - China Aerospace Cooperation Conference and Food Safety Testing Center Signing Ceremony", where Tingyi will join hands with the Tianjin Development Zone to invest heavily in building a national-level food safety testing center in Tianjin. According to a Tingyi representative, Tingyi has established a food safety and quality control team of more than 3,000 people across the country, with more than 1,500 testing indicators for raw materials and products each year, and more than 3.5 million tests conducted annually, averaging 10,000 inspections per day, to ensure food safety. In the view of industry insiders, Tingyi is seeking transformation through a series of actions. Judging from the company's Q3 financial results, the effects have become apparent, and Tingyi is entering a steady upward channel. In Zhu Danpeng's view, as the industry leader, Tingyi should bear greater responsibility. It not only bears the responsibility for its own development but also the mission to lead the industry towards healthy, orderly, and sound development. Tingyi's current layout has a positive promoting effect on China's instant noodle industry. "Tingyi has already emerged from the industry downturn of previous years, and the company's adjustment period has passed. From an industry perspective, I am very confident about the company's future development." It is worth noting that Tingyi's improving performance is also reflected in its stock price. According to Securities Daily statistics, on January 3, Tingyi's stock opened at HK$9.36 per share, and on November 13, the stock closed at HK$12.5 per share, with a market value of HK$70.1 billion. On November 9, the stock price hit a high of HK$13 per share. Based on the above data, Tingyi's stock price has risen 33.54% year-to-date; calculated at the highest price on October 9, the maximum increase for the year was 38.9%. Regarding Tingyi's performance, UBS analysts said that instant noodle consumption has gradually recovered and accelerated upgrading since 2017, which is expected to support Tingyi's profitability returning to the 12% high level of 2010 (compared to 6.6% last year). China's instant noodle consumption has huge potential for upward growth. Similarly, Wang Jiahui, an analyst at Industrial Securities International, also said that Tingyi's sales across all categories recovered in the first half of the year, with a significant increase in net profit in Q2. In the second half of the year, the company will continue to strengthen its product portfolio optimization and market strategy, and sales are expected to continue to recover. Source: China Economic Net, Xia Fang, edited by New Distribution -END-