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Yihai International (1579 HK): Undervalued proxy to Haidilao Hotpot | Current: HK$17.28 | Target: HK$21.10 | Upside: +22% |
By My Route To Financial Freedom  •  July 25, 2018

1. Introduction

China’s No.1 hotpot chain Haidilao Group finally filed for IPO on 17th May 2018 after almost 4 years of IPO rumours and sending its sole soup base condiment supplier Yihai International into its all-time high since listing. Considering its fairly predictable of cash flow and bright growth prospects, there is little wonder why it is trading at over 50x P/E in today’s volatile market environment.

Despite trading close to it’s all-time high level, there seems to be some room for its share price based on a DCF implied value of HKD 21.1, representing 22% upside. It is still relatively cheap on a forward P/E of 37x.

2.   Simple business model

Yihai is Haidilao’s soup base condiment production arm which was spun-off and listed on the main board of HKex in July 2016.

The company’s products are mainly made from soya bean oil, animal oil, chilli, ...

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By My Route To Financial Freedom
Aloysius Lee, co-founder, is currently pursuing a degree in Business at Nanyang Technological University (NTU) and is the President of Investment Interactive Club 17/18. He graduated from Singapore Polytechnic (SP) with a Diploma in Banking and Financial Services. During his course of study, he was awarded the SB Business School Achiever Award, UOB Kay Hian Scholarship and Phillip Futures Prize ...
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