Core Viewpoint - Fuling Pickle's recent semi-annual report indicates a trend of "slight revenue increase, slight profit decline," reflecting ongoing challenges in growth and market competition [1][4]. Financial Performance - The company achieved approximately 1.313 billion yuan in revenue for the first half of the year, a year-on-year increase of 0.51%, while net profit was about 441 million yuan, down 1.66% year-on-year [2][4]. - Sales expenses increased by 22.94% due to new product launches and marketing activities aimed at enhancing competitiveness in the market [2][3]. - Accounts receivable surged to 1.246 billion yuan, marking a year-on-year increase of 1421.45%, attributed to providing credit to customers to support sales [2]. Market Dynamics - The number of distributors decreased from 2,632 at the end of the previous year to 2,446 by mid-year, as the company optimized its distribution channels [3][6]. - The core business of pickles has seen revenue decline from 2.175 billion yuan in 2022 to 2.044 billion yuan in 2024, with a slight increase of 0.45% in the first half of 2025 [5][6]. Industry Challenges - The pickle market is experiencing stagnation, with a compound annual growth rate of only 1.25% from 2007 to 2021, as consumer preferences shift towards diverse options [8][9]. - The company has faced increased competition from emerging brands and changing consumer habits, particularly among younger demographics [8][10]. Strategic Initiatives - Fuling Pickle has adopted a "dual-driven" strategy of "internal growth + external expansion," planning to acquire Weizimei to enter the compound seasoning market [1][11]. - The acquisition of Weizimei, which specializes in Sichuan-style compound seasonings, is seen as a critical step to overcome growth bottlenecks [12][13]. - The company aims to leverage its existing distribution channels to enhance Weizimei's market presence post-acquisition [13]. Integration Challenges - The integration of the acquired business poses challenges due to differences in operational models, user demographics, and resource allocation [14].

Core Viewpoint - The company reported strong financial performance for 1H2025, with significant revenue and profit growth, driven by robust customer traffic and performance across its three main business segments [1][2][3]. Financial Performance - 1H2025 revenue reached 1.459 billion, a year-on-year increase of 28.2%, with a 3.9% growth when excluding the impact of the acquisition of Nairui [1] - Net profit attributable to the parent company was 156 million, up 34.9% year-on-year [1] - Operating cash flow for 1H2025 was 410 million, reflecting an 84.4% increase year-on-year [1] Business Segment Performance - The three main business segments showed strong growth: - Beauty and wellness services generated 810 million, up 29.6% - Medical beauty services reached 500 million, a 13.0% increase - Sub-health medical services surged to 150 million, a remarkable 107.8% growth [1][2] - Direct sales and franchise models contributed to revenue, with direct sales at 740 million (31.0% growth) and franchise at 70 million (16.2% growth) [1] Customer Engagement - Direct sales stores saw customer traffic of 850,000, a 48.6% increase, and active membership rose to 112,000, up 45.7% [1] - Medical beauty direct stores had customer traffic of 50,000, a 28.0% increase, with active members at 24,000, up 27.6% [2] - Sub-health medical services experienced a customer traffic increase of 75.5% to 19,000, with active members growing 93.4% to 7,014 [2] Store Expansion - As of the end of 1H2025, the total number of stores reached 552, an increase of 143 stores year-on-year [3] - The number of beauty and wellness service direct stores was 238, up 69 stores, while franchise stores also increased by 69 to 276 [3] Profitability - The overall gross margin improved by 2.3 percentage points to 49.3%, with net profit margin increasing by 0.5 percentage points to 10.7% [3] - Gross margins for the three business segments were 42.1% for beauty and wellness, 56.9% for medical beauty, and 63.1% for sub-health services, all showing year-on-year improvements [3] Cost Management - Sales, management, and R&D expense ratios were 17.2%, 16.2%, and 1.4%, respectively, with slight increases attributed to acquisitions and marketing efforts [4] - The company is focusing on both organic growth and acquisitions, with the integration of Nairui showing positive results [4] Future Outlook - The company has raised its net profit forecasts for 2025-2027, reflecting confidence in continued growth and integration success [5] - The business model is evolving, with expectations for significant growth potential in the beauty and medical sectors [5]

Investment Rating - The report maintains a "Buy" rating for the company [1] Core Insights - The company achieved significant revenue and profit growth in the first half of 2025, with revenue reaching 1.459 billion yuan, a year-on-year increase of 28.2%, and net profit of 156 million yuan, up 34.9% [5] - Operating cash flow for the first half of 2025 was 410 million yuan, reflecting an 84.4% year-on-year increase [5] - The company continues to expand its business model through both organic growth and acquisitions, with the integration of the acquired brand NaiRuiEr showing positive results [10] Revenue Performance - The company’s three main business segments showed strong performance: Beauty and Health Services, Medical Aesthetic Services, and Sub-health Medical Services, with respective revenues of 810 million, 500 million, and 150 million yuan, representing year-on-year growth of 29.6%, 13.0%, and 107.8% [6] - Direct sales and franchise models contributed to revenue growth, with direct sales revenue reaching 740 million yuan, up 31.0% year-on-year, and franchise revenue at 70 million yuan, up 16.2% [6] Customer Engagement - Direct sales stores saw a customer footfall of 850,000, a 48.6% increase year-on-year, and active membership grew to 112,000, up 45.7% [6] - The medical aesthetic segment also showed resilience, with foot traffic of 50,000 and active members of 24,000, reflecting year-on-year growth of 28.0% and 27.6% respectively [6] Business Expansion - The company expanded its sub-health medical services, with foot traffic reaching 19,000, a 75.5% increase, and active members growing by 93.4% [7] - The revenue from the functional medicine segment increased by 122.0% year-on-year, driven by new product lines [7] Profitability - The overall gross margin improved by 2.3 percentage points to 49.3%, and the net profit margin increased by 0.5 percentage points to 10.7% [8] - The gross margins for the three business segments were 42.1%, 56.9%, and 63.1%, with respective year-on-year increases of 1.8, 1.8, and 8.7 percentage points [9] Future Outlook - The company plans to continue its dual strategy of organic growth and acquisitions, with a focus on expanding its beauty and health brand matrix and enhancing its medical services [10] - The forecast for net profit for 2025-2027 has been adjusted upwards to 310 million, 350 million, and 410 million yuan, with corresponding EPS estimates of 1.30, 1.48, and 1.72 yuan [10]