Investment Rating - The investment rating for the company is "Outperform the Market" [5][8]. Core Insights - The company's revenue and net profit declined as expected, with a 6.6% year-on-year decrease in revenue to 27.01 billion yuan for the fiscal year 2025, influenced by weak consumer demand and reduced foot traffic [1]. - The retail channel revenue fell by 6.8% to 23.03 billion yuan, while wholesale channel revenue decreased by 5.8% to 3.79 billion yuan [1]. - The main brands, Nike and Adidas, saw a revenue drop of 6.1% to 23.31 billion yuan, and other brands experienced a 9.9% decline to 3.50 billion yuan [1]. - The net profit attributable to the parent company decreased by 41.9% to 1.29 billion yuan, with a gross margin decline of 3.4 percentage points to 38.4% due to increased promotional discounts and a higher proportion of low-margin online sales [1][2]. - The company maintained a high dividend payout ratio of 135%, reflecting strong cash flow generation capabilities [2]. Revenue and Profit Trends - The company reported a 20% year-on-year increase in operating cash flow to 3.76 billion yuan, with a free cash flow to net profit ratio of 2.6 times, indicating efficient cash generation [2]. - The revenue decline narrowed in the second half of the fiscal year, with a 7.9% drop in the first half and a 5.4% drop in the second half, while profit declines were more pronounced [2]. - The total sales area decreased by 12.4% year-on-year, but the sales area per store increased by 7.2%, indicating improved store efficiency [3]. Strategic Initiatives - The company is optimizing its store structure and enhancing membership operations, with a total user base of 86 million, where member contributions account for 93.2% of sales [3]. - The company is strategically entering the outdoor and professional sports segments, partnering with high-end brands like Norda and Norrona for exclusive operations in China [3]. - The management expressed cautious optimism for the new fiscal year, focusing on efficiency and profitability improvement, with a target of maintaining net profit levels year-on-year [4]. Financial Forecasts - The company expects net profits for fiscal years 2026 to 2028 to be 1.30 billion, 1.46 billion, and 1.63 billion yuan respectively, reflecting a downward adjustment from previous forecasts [5][59]. - The reasonable valuation range is maintained at 3.80 to 4.00 HKD, corresponding to a price-to-earnings ratio of 17 to 18 times for fiscal year 2026 [5][59].

Investment Rating - The investment rating for the company is "Outperform the Market" [5][8][59] Core Views - The company's revenue and net profit decline is in line with expectations, with a 6.6% year-on-year decrease in revenue to 27.01 billion yuan for the fiscal year 2025, impacted by weak consumer demand and reduced foot traffic [1][2] - The company maintains a high dividend payout ratio of 135%, reflecting strong cash flow generation capabilities, with a free cash flow to net profit ratio of 2.6 times [2][59] - The company is strategically enhancing its outdoor segment and optimizing its store structure, with a net reduction of 1,124 direct stores to 5,020, while improving single-store sales efficiency [3][59] Summary by Sections Financial Performance - For the fiscal year 2025, retail channel revenue decreased by 6.8% to 23.03 billion yuan, while wholesale channel revenue fell by 5.8% to 3.79 billion yuan [1] - The company's gross profit margin declined by 3.4 percentage points to 38.4%, primarily due to increased promotional discounts and a higher proportion of low-margin online sales [1][2] - The net profit for the fiscal year 2025 dropped by 41.9% to 1.29 billion yuan, with a net profit margin of 4.8% [1][2] Cash Flow and Dividend - Operating cash flow increased by 20% year-on-year to 3.76 billion yuan, indicating efficient cash generation [2] - The company has maintained a cumulative dividend payout ratio of 104.2% since its listing in 2019, showcasing its commitment to returning cash to shareholders [2][59] Strategic Initiatives - The company is focusing on enhancing its membership operations and omnichannel retail capabilities, with membership contributing 93.2% of sales [3] - The company has entered into exclusive partnerships with high-end outdoor brands, aiming to strengthen its product matrix in the professional and trendy segments [3][59] Future Outlook - The management expresses cautious optimism for the new fiscal year, targeting stable net profit levels and improved net profit margins through cost reduction and efficiency enhancements [4][59] - The company has adjusted its profit forecasts for fiscal years 2026 to 2028, expecting net profits of 1.30 billion, 1.46 billion, and 1.63 billion yuan respectively [59][60]

Core Insights - The snack wholesale model, originating from Japan, offers a supermarket-like shopping experience with lower prices, rapidly growing in China's snack market, reaching a market size of 104.59 billion yuan in 2024 from 4.08 billion yuan in 2019 [1][7]. Industry Overview - The snack wholesale model is characterized by a wide range of brands, convenient locations, fast product updates, and high cost-effectiveness, with discounts of 60-80% compared to offline supermarkets and 80-90% compared to online channels [2][3]. - The snack wholesale industry is experiencing robust growth, with the channel accounting for over 40% of China's snack sales by 2024, making it the leading sales channel in the market [5][7]. Market Dynamics - The snack wholesale industry is driven by both demand and supply, with a focus on product updates to meet consumer preferences while maintaining healthy inventory levels [1][7]. - The industry is seeing a shift towards a "go-between" model, enhancing efficiency and price competitiveness, leading to rapid market expansion [5][7]. Competitive Landscape - The market is becoming increasingly competitive, with major brands like "零食很忙" and "万辰集团" leading the charge, holding 18.5% and 17.5% market shares respectively [12]. - The competitive environment is marked by aggressive expansion strategies, with significant investments planned for market development in northern China [11][12]. Financial Performance - "万辰集团" reported a revenue of 31.79 billion yuan in 2024, a 262.94% increase year-on-year, reflecting the rapid growth of its snack wholesale business [14]. - "良品铺子" reported a revenue of 5.48 billion yuan in 2024, a decline of 8.66%, indicating challenges in maintaining growth amidst increasing competition [16]. Future Trends - The industry is moving towards an integrated online and offline retail model, enhancing customer experience and operational efficiency [18]. - There is a growing trend towards health-oriented and functional snacks, with sales of low-sugar and high-protein products increasing by 40% in 2024 [19]. - Brands are accelerating international expansion, particularly in Southeast Asia, to tap into new markets and diversify revenue streams [20].