Key takeaway

The company continues to focus on six core categories: spicy braised snacks, baked potato products, deep-sea snacks, egg snacks, dried fruits and nuts, and konjac jelly pudding, while fully strengthening and deepening the supply chain, integrating and refining all-channel operations, and focusing on blockbuster products. In 2025, the company completed the brand building of its core category brands. Among them, the single product “Big Devil Sesame Sauce Vegetarian Beef Tripe” not only drove growth in the konjac category, but also systematically transformed the company’s category brand model, blockbuster product model, quantitative distribution channel model, and sales model outside its home region. In 2026, the company expects the konjac category to maintain rapid growth of over 30%. Since 2023, the company has continuously demonstrated its product R&D capabilities to the market. From the “Big Devil” sesame sauce vegetarian tripe konjac product, the “Egg King” quail egg product, to seafood snacks such as “Pure Cod” cod rolls and spicy tofu, the company has demonstrated strong R&D innovation and channel execution capabilities.

Event

The company releases 1Q26 report

In 1Q26, the company recorded total operating revenue of RMB1.58bn, +2.9% YoY; net profit attributable to shareholders of the parent company was RMB230mn, +29.5% YoY; net profit attributable to shareholders of the parent company excluding non-recurring items was RMB200mn, +30.5% YoY.

Quick Take

E-commerce correction is nearing an end, with revenue growth expected to accelerate in 2Q.

In 1Q26, the revenue side still maintained steady growth, mainly driven by offline channel growth of about 20% YoY, primarily contributed by three channels: snack specialty retailers, high-end membership stores (new cod roll product launched at Sam’s Club), and quantitative circulation (core konjac products continued to grow rapidly). Online channels continued the trend from 2H25, as the company proactively implemented strategic adjustments to its e-commerce business, actively scaling back low gross margin product categories and streamlining products with low margins and low sales. In 2H25, the e-commerce business declined by about 40% YoY, and the correction is expected to continue until mid-2026. Starting from May 2026, the company’s e-commerce business will enter a low base period, and overall company revenue is expected to accelerate significantly in June; the new cod roll product at Sam’s Club has performed well and is expected to be promoted across all channels subsequently, with potential to become the company’s next blockbuster product.

Looking ahead to 2026, the company expects high momentum membership stores to be the fastest growing channel. The traditional distribution channel will further optimize the structure of distributors and subdistributors, cultivate a large group of core strategic partners, and strengthen the development of high quality terminal outlets. The sesame konjac vegetarian tripe blockbuster SKU will drive the formation of a broader category matrix, and the company expects to maintain relatively high growth for the full year. The snack discount retail channel will continue to maintain solid growth momentum, and the company will further deepen its comprehensive strategic cooperation with Busy Ming. At the same time, the company will focus on expanding mid tier snack discount retail systems with 2,000–4,000 stores, achieving incremental sales by increasing SKU coverage and jointly developing core blockbuster products.

Channel structure adjustment, profitability improvement

In 1Q26, the company’s gross margin rose 3.4ppts YoY to 31.8%, mainly thanks to product mix adjustment, with higher shipments of high-margin konjac, Danhuang and seafood-flavored snack categories, optimization of the product mix within the konjac category, and the completion of low-margin product clearance in the e-commerce channel. In 2025, despite a sharp rise in the average procurement price of konjac flour, the key raw material, the gross margin of the core konjac snack category still increased against the trend to 34.48%, up 1.21 pct YoY, highlighting the advantages of scale effects and supply chain management. Healthy egg products benefited from volume ramp-up in new channels such as Sam’s Club and product premiumization, with gross margin rising sharply by 5.63pcts YoY to 27.73%. The company’s selling/administrative/R&D/financial expense ratios in 1Q26 were 11.2%/3.4%/1.2%/0.4%, respectively, unchanged YoY. The company’s net profit attributable to shareholders of the parent company margin/net profit attributable to shareholders of the parent company after non recurring items margin in 1Q26 were 14.6%/12.9%, up 3.0/2.7 pcts YoY.

Earnings forecast and investment recommendation: We expect the company’s revenue in 2026/2027/2028 to reach RMB6.644bn/RMB7.615bn/RMB8.628bn, up 15%/15%/13% YoY, and net profit to reach RMB897mn/RMB1,115mn/RMB1,281mn, up 20%/24%/15% YoY. We maintain a “buy” rating.

Risks:The promotion of new products may fall short of expectations, and newly launched products may not align with consumer tastes. The expansion of new channels may face challenges, and growth in the snack discount retail channel may slow. Intense competition within the industry may result in declining profitability for individual stores as brands engage in aggressive discounting to capture market share. The heightened competition in the snack industry could lead to a decrease in overall industry profit margins. A significant decline in traffic at supermarkets could further shrink the revenue from this channel. Diminished consumer spending power may lead to a lower inclination toward buying discretionary food, resulting in reduced snack purchases at the household level. Additionally, small brand products in rural areas and lower tier cities may regain popularity due to their lower prices.