Key takeaway

The decline in the company's revenue and profit for 26Q1 narrowed significantly, while contract liabilities and cash flow performed relatively well. Currently, Special A+ products such as Sikai are under pressure, while Special A products such as Danya and Dankai perform relatively well, jointly building the fundamental base. The proportion outside the province has increased to 10%, achieving breakthroughs in Anhui and Shandong provinces. We are optimistic about the company's further market share growth in 2026 and the achievement of its target for profit growth higher than the industry average. The current dividend yield reaches 4.6%, offering good cost effectiveness.

Event

The company released its 2025 Annual Report and 2026 First Quarter Report.

In 2025, the company’s total revenue / net profit attributable to the parent company was RMB10.182bn / RMB2.604bn (YoY -11.81% / -23.69%). In 25Q4, total revenue / net profit attributable to the parent company was RMB1.300bn / RMB55mn (YoY -18.94% / -83.25%). In 26Q1, total revenue / net profit attributable to the parent company was RMB4.323bn / RMB1.385bn (YoY -15.23% / -15.76%). Revenue and performance meet expectations.

Quick Take

Mid-to-high-end Special A products are significantly superior, with Danya and Dankai maintaining growth resilience

1) In 2025, sales volume/price per ton changed by -10.33%/-2.72% year-on-year. Among them, revenue from Special A+ / Special A products was RMB6.225bn / RMB3.269bn respectively (YoY -16.89% / -2.33%), with sales volume changing by -17.61% / -6.68% respectively, and price per ton increasing by 0.87% / 4.66% respectively. The revenue proportion of Special A products increased by 3.49 percentage points (ppt) to 32.65%. We expect that Dankai and Danya may maintain low single-digit growth in 2025, while Sikai and above products will be under relative pressure.

2) In 26Q1, the operating revenue of Special A+ / Special A products was RMB2.445bn / RMB1.624bn respectively (YoY -22.84% / -1.55%), and their revenue proportions changed by -5.09 pct / +5.58 pct respectively.

In 26Q1, Central Jiangsu and Yancheng performed relatively well, and the proportion outside the province increased to 10%

In 2025, the revenue growth rates inside/outside the province were -13.92%/+0.26%, and the proportion of revenue from outside the province rose by 1.21 pct to 9.27%. Revenues in Huai'an/Nanjing/Southern Jiangsu/Central Jiangsu/Yancheng/Huaihai/outside the province changed by -15.45%/-16%/-20.27%/-0.98%/-15.66%/-18.35%/+0.26% respectively, among which the Central Jiangsu region performed relatively well. We believe that the company's sales scale in Anhui and Shandong achieved further breakthroughs in 2025 and realized rapid growth. In 2025, the number of distributors inside/outside the province changed by +169/-39.

In 26Q1, the revenue growth rates inside/outside the province were -17.57%/0.84%, and the proportion of revenue from outside the province increased by 1.72 pct to 10.33%. Among them, the revenue growth rates in Central Jiangsu/Yancheng were -6.13%/-4.82%, indicating that Central Jiangsu, Yancheng, and areas outside the province performed relatively well. In 26Q1, the number of distributors inside/outside the province changed by -11/+44.

Increased promotional efforts in 2025 led to a higher expense ratio, while the dividend pa yout ratio and advance receipts performed exceptionally well.

1) Profitability: In 2025, the gross margin/net margin decreased by 0.50/3.98 pct YoY to 74.25%/25.57%; in 26Q1, the gross margin/net margin changed by +0.77/-0.20 pcts YoY to 74.40%/32.04%.

2) Expense ratio: In 2025, the sales/administrative expense ratio changed by +4.57/+0.19 pct YoY, and in 26Q1, the sales/administrative expense ratio changed by +1.47/+0.04 pct YoY. The increase in sales expenses in 2025 was mainly due to a 33.5% increase in comprehensive promotional expenses.

3) Advance receipts: In 2025, contract liabilities increased by RMB115mn YoY to RMB1.708bn, and in 26Q1, contract liabilities increased by RMB1.021bn YoY to RMB1.560bn.

4) Cash flow: Operating cash flow decreased by 47.39% YoY in 2025, and operating cash flow increased by 48.10% YoY in 26Q1.

5) Dividend payout ratio: The proposed annual dividend for 2025 is RMB1.5bn, with a dividend payout ratio of 57.46% and a current dividend yield of 4.6%.

6) Business plan: In 2026, the company will strive to achieve further growth in market share, with profit growth exceeding the industry average.

Earnings forecast and investment recommendation: The company is projected to achieve revenues of RMB10.222bn, RMB10.811bn, and RMB11.392bn in 2026-2028, reflecting YoY growth rates of +0.41%, +5.76%, and +5.37%, respectively. Net profit attributable to the parent company is expected to reach RMB2.618bn, RMB2.778bn, and RMB2.939bn, with YoY increases of +0.57%, +6.09%, and +5.80%. Based on these forecasts, EPS is estimated at RMB2.10, RMB2.23, and RMB2.36, respectively. The corresponding 2026-2028 P/E TTM are expected to be 12.36X, 11.65X, and 11.01X, respectively.

Risks: Household demand recovery may fall short of expectations. In the past 2 years, economic growth has slowed due to macroeconomic factors, and household income growth has also been affected. The pace of shortto medium-term household income growth and consumer spending power recovery may not meet expectations. Slower-than-expected economic recovery: If the company's cash flow recovery is slower than expected, the resurgence in demand for the company's products in business catering scenarios may be slower than expected. Food safety: In recent years, food safety has always been the focus of consumers. Although the company in the food industry has continuously improved production quality control levels, since it involves many links and enterprises, there are still food quality and safety risks. Abnormal stock price fluctuations. Changes in the capital market sentiment or expectation towards the company may lead to abnormal stock price fluctuations.