Guo Ji Jin Rong Bao·2025-11-25 15:57Core Viewpoint - China Wangwang's flagship product, Wangzai Milk, is experiencing declining sales, leading to a challenging financial performance for the company in the recent half-year report [1][4]. Financial Performance - For the half-year ending September 30, 2025, China Wangwang reported revenue of 11.108 billion yuan, a slight increase of 2.1% year-on-year [1]. - The company's net profit attributable to shareholders was 1.717 billion yuan, down 7.8% year-on-year, marking the lowest net profit margin of 15.46% in nearly four years [1][11]. - The stock price fell over 6.5% on the first trading day after the earnings release, closing at 4.71 HKD per share, a decline of 4.27% [1]. Revenue Composition - The dairy and beverage segment, which includes Wangzai Milk, constitutes a significant portion of the company's total revenue, accounting for nearly half [3]. - Revenue from the dairy and beverage segment decreased by 1.1% to 5.941 billion yuan, contributing to the overall revenue decline [6]. Market Challenges - The overall market for ambient dairy products is sluggish, compounded by the rapid growth of affordable ready-to-drink tea beverages, which has diminished Wangzai Milk's market presence [4]. - The company's gross margin for the dairy and beverage segment fell from 50.3% to 47.8%, indicating significant profit pressure [6]. Emerging Channels - China Wangwang is actively expanding into emerging sales channels, with snack wholesale channels growing rapidly and now accounting for 15% of total revenue [6]. - Despite the growth in snack sales, the discount channels may weaken pricing power and increase channel costs, putting pressure on profit margins [8]. Other Product Segments - The snack food segment, including products like Wangzai QQ candy and milk candy, achieved revenue of 2.940 billion yuan, a year-on-year increase of 7.7% [8]. - The ice cream segment benefited from hot weather and the growth of snack wholesale channels, showing double-digit growth [8]. - The rice cracker segment generated revenue of 2.13 billion yuan, up 3.5% year-on-year [8]. Analyst Reactions - Following the mid-term performance report, several institutions, including JPMorgan, Bank of America, and UBS, downgraded their target prices for China Wangwang [10][11]. - Bank of America lowered its target price to 4.7 HKD, rating it as "underperform," while JPMorgan maintained a "neutral" rating but reduced its target price from 5.1 HKD to 4.9 HKD [11]. - Analysts cited declining sales of dairy products, falling gross margins, and rising administrative expenses as key reasons for the disappointing performance [11].