Ge Long Hui·2025-11-26 13:22Core Viewpoint - The company's 1HFY25 performance slightly missed market expectations due to higher-than-expected operating expenses, despite a stable revenue growth of 2.1% year-on-year [1][2]. Performance Review - The company reported a revenue of 11.108 billion yuan in 1HFY25, with a year-on-year increase of 2.1% and a net profit attributable to shareholders of 1.717 billion yuan, down 7.8% year-on-year [1]. - Revenue growth varied by product category: rice snacks +3.5%, dairy products -1.1%, and leisure foods +7.7% [1]. - Key highlights include: 1. Rice snacks saw single-digit growth in sales, with new product revenue contributing double-digit percentages [1]. 2. Dairy products faced slight pressure due to weak industry demand, with Wangzai milk revenue declining by low single digits, while beverage subcategories grew nearly 40% in revenue and doubled in sales, benefiting from emerging channels [1]. 3. Leisure food new product revenue accounted for nearly 25%, with ice cream revenue growing in double digits [1]. - Traditional and modern channel sales declined slightly year-on-year, while emerging channels, particularly snack bulk purchases, showed rapid growth [1]. Development Trends - The company's gross margin decreased by 1.1 percentage points year-on-year, primarily due to rising costs of imported bulk powder and palm oil, along with product structure adjustments [2]. - The gross margins for rice snacks, dairy products, and leisure foods changed by +1.3, -2.5, and +1 percentage points respectively, with the decline in dairy margins attributed to increased costs of imported bulk powder affecting Wangzai milk [2]. - Distribution and administrative expense ratios increased by 1.4 and 0.9 percentage points year-on-year, driven by increased marketing investments and personnel costs following the establishment of product-specific divisions [2]. Profit Forecast and Valuation - The company expects stable revenue growth in the second half of FY25, with continued high growth in snack bulk purchase channels, although sales performance may be pressured in Q3 FY25 due to the timing of the Spring Festival [2]. - Profitability is anticipated to stabilize in the second half, with gross and profit margins expected to remain flat quarter-on-quarter, while the company may continue its investment in new products and emerging channels [2]. - The earnings forecast for FY25 and FY26 has been revised down by 13% and 9% to 3.9 billion and 4.3 billion yuan respectively, with current trading at 14x and 12x P/E for FY25 and FY26 [2]. - The target price is maintained at 5.83 HKD, corresponding to 16x and 14x P/E for FY25 and FY26, indicating a 19% upside potential, with an outperform rating maintained [2].