Foshan Haitian Earnings: Soft 2023 Sales but Solid Channel Fill Ahead of Lunar New Year in 2024

Wide-moat Foshan Haitian reported 2023 and first-quarter 2024 results, with both revenue and net income below our estimates for 2023. However, we think the first quarter was off to a good start, with both sales and earnings exceeding our projections. We leave our net income projections largely unchanged for 2024-28 and retain our fair value estimate at CNY 47 per share, which implies 42 times 2024 price/earnings, 31 times EV/EBITDA, and 1.4% dividend yield. Haitian’s share prices appeared to have stabilized over the past few quarters, as investors likely see the company bottoming out from the product and channel transition process. We think first-quarter results were constructive signs for its sales recovery, and we continue to see shares as undervalued.