Investment Rating - The investment rating for the company is not explicitly stated in the provided documents, but the report suggests a cautious outlook with expectations of revenue decline and stable operating profit margins [1][3]. Core Viewpoints - The company experienced a revenue decline of 6.95% year-on-year in the first half of 2025, with total revenue reaching RMB 415.67 billion. However, operating profit increased by 13.43% to RMB 35.38 billion, while net profit attributable to shareholders decreased by 16.37% to RMB 20.46 billion [1][3]. - The liquid milk segment faced pressure due to lower demand, leading to a revenue drop of 11.22%, while other segments like ice cream, milk powder, and cheese saw revenue growth of 15.40%, 2.47%, and 12.28% respectively [3]. - The company is diversifying its product structure and responding to market changes by launching various temperature-stable liquid milk products and collaborating with emerging channels for customized products [3]. - The company’s gross profit margin improved to 41.7%, up 1.4 percentage points year-on-year, primarily due to a decrease in raw milk prices. Operating profit margin also increased significantly by 1.5 percentage points to 8.5% [3]. - The company is positioned at the bottom of its valuation range over the past five years, with expectations for a recovery in supply and demand conditions to drive valuation improvement [3]. Financial Summary - For the first half of 2025, the company reported a revenue of RMB 415.67 billion, a decrease of 6.95% year-on-year. The operating profit was RMB 35.38 billion, an increase of 13.43%, while the net profit attributable to shareholders was RMB 20.46 billion, down 16.37% [1][3]. - The projected net profits for 2025, 2026, and 2027 are RMB 42.79 billion, RMB 49.40 billion, and RMB 56.66 billion respectively, with corresponding P/E ratios of 13X, 11X, and 10X [3][4]. - The company’s gross margin is expected to remain stable at around 40.20% for the upcoming years, with a slight increase in net profit margin projected [4].

Core Viewpoint - The performance of two leading companies in the baking industry, Lihigh Food (立高食品) and Hairong Technology (海融科技), shows a stark contrast in their financial results for the first half of 2025, highlighting a significant divergence in industry performance despite similar market conditions [1][6]. Group 1: Lihigh Food Performance - Lihigh Food reported a revenue of 2.07 billion yuan, a year-on-year increase of 16.2%, and a net profit of 171 million yuan, up 26.24%, indicating a strong growth momentum [1][4]. - The second quarter saw a revenue of 1.024 billion yuan, an 18.4% increase year-on-year, and a net profit of approximately 82.39 million yuan, reflecting a 40.84% growth compared to the first quarter [1][4]. - The revenue from baked goods reached 1.125 billion yuan, growing 6.08%, while the revenue from baking raw materials surged to 945 million yuan, a significant increase of 31.82%, driven by strong demand for cream and sauces [4][8]. - Cost control measures were effective, with sales expenses as a percentage of revenue decreasing by 1.45 percentage points to 10.61%, and management expenses down by 1.44 percentage points to 5.57% [4][7]. Group 2: Hairong Technology Performance - Hairong Technology's revenue was 512 million yuan, a slight decline of 1.33%, with a net profit plummeting by 95.42% to only 3.17 million yuan [6][7]. - The second quarter showed a net loss of 4.06 million yuan, indicating a continuous decline in profitability [6]. - The company's revenue structure is heavily reliant on plant-based cream, which accounted for over 90% of its income, with this segment's revenue slightly declining by 0.29% to 476 million yuan [6][8]. - The gross margin fell significantly by 11.67 percentage points to 26.04%, while sales, management, and R&D expenses all increased, leading to a dual pressure on profitability [7][8]. Group 3: Product Structure and Market Strategy - Lihigh Food's diversified product structure includes frozen baked goods (approximately 60% of revenue) and baking raw materials (approximately 40%), providing a balanced revenue stream [8][9]. - In contrast, Hairong Technology's revenue is predominantly from a single product line, leading to vulnerabilities in changing market conditions [8][9]. - The company attempted to diversify its product offerings but faced challenges in execution, resulting in a lack of product line expansion [10][11]. Group 4: Channel Strategy and Cost Efficiency - Lihigh Food has shifted towards a direct sales model, incorporating major supermarkets like Sam's and Hema, which has improved sales efficiency and cost control [13][17]. - Hairong Technology remains heavily reliant on a distribution channel, with 77% of its revenue coming from this model, which has seen a decline in efficiency [13][20]. - The sales expense ratio for Hairong Technology increased to 15.1%, while Lihigh Food's ratio decreased to 10.61%, reflecting better cost management [20].