Core Viewpoint - The company reported a significant decline in revenue and net profit for the first half of 2025, primarily due to inventory clearance and reduced government subsidies, but anticipates recovery in the second half of the year with the potential positive impact of fertility subsidies and improved operational efficiency through digital management tools [1][2]. Financial Performance - For 25H1, the company achieved revenue of 9.15 billion yuan and a net profit of 1 billion yuan, representing year-on-year declines of 9.4% and 46.7%, respectively, aligning with prior forecasts [1]. - The gross margin decreased by 6.3 percentage points to 61.6%, while the net profit margin fell by 7.6 percentage points to 10.9%, largely due to reduced government subsidies and losses from inventory adjustments [2]. - The company plans to distribute at least 2 billion yuan in dividends and repurchase up to 10% of its shares, using at least 1 billion yuan for this purpose [2]. Business Segments - Revenue from dairy products and nutritional products declined by 9.1%, while revenue from raw milk plummeted by 79.8% in 25H1, reflecting ongoing demand pressures in the infant formula sector [1]. - The company reported revenues of 9.04 billion yuan in mainland China, 90 million yuan in the U.S., and 20 million yuan in Canada, with year-on-year changes of -9.5%, +11.9%, and -30.7%, respectively [1]. Future Outlook - The company expects the inventory adjustment process to conclude by August 2025, with anticipated positive effects from fertility subsidy policies in the second half of the year [1]. - Revenue forecasts for 2025-2027 have been revised downwards to 19.91 billion, 21.20 billion, and 22.23 billion yuan, reflecting ongoing industry challenges and competitive pressures [2]. - The company aims to enhance operational efficiency through improved channel management and digital tools, which may lead to better profitability in the long term [2].

Investment Rating - The investment rating for Jichuan Pharmaceutical is maintained as "Buy" [1][7]. Core Views - The company is expected to reach an inflection point in performance, supported by high dividends and business development catalysts [1]. - The first half of 2025 saw a significant decline in revenue and net profit due to high base effects from the flu market and price reductions from centralized procurement [7]. - The company has effectively controlled marketing expenses, leading to a 39.33% year-on-year decrease in sales expenses for the first half of 2025 [7]. - There is an expectation for sequential improvement in performance in the second half of 2025 as inventory levels normalize and terminal demand increases [7]. - The company has consistently increased its cash dividend payout ratio, reaching 75.90% in 2024, indicating a strong commitment to shareholder returns [7]. - Jichuan Pharmaceutical is focusing on enhancing its product pipeline through research and collaboration, with several new products expected to launch in the coming years [7]. - The forecasted net profit for 2025-2027 is projected to be 18.03 billion, 19.86 billion, and 23.11 billion respectively, with corresponding EPS of 1.96, 2.16, and 2.51 [7]. Financial Summary - For the first half of 2025, Jichuan Pharmaceutical reported revenue of 2.749 billion (down 31.87% year-on-year) and a net profit of 724 million (down 45.87% year-on-year) [7]. - The company anticipates a revenue decline of 16.96% in 2024, followed by a further decline of 20.53% in 2025, before a recovery in subsequent years [3][7]. - The projected P/E ratios for 2025-2027 are 13.18, 11.96, and 10.28 respectively, indicating a potential for valuation improvement as earnings recover [3][7].

Investment Rating - The investment rating for the company is "Buy" with a target price of HKD 5.23, while the closing price as of August 28 was HKD 4.36 [1][5]. Core Views - The company's revenue and net profit for the first half of 2025 were reported at RMB 9.15 billion and RMB 1 billion, respectively, reflecting a year-on-year decline of 9.4% and 46.7%, which aligns with the performance forecast [5][6]. - The company is undergoing a phase of inventory clearance, which is expected to continue until the end of August 2025, impacting revenue in the short term [5][6]. - The report anticipates a recovery in operations post-inventory clearance, with positive effects expected from fertility subsidies and increased dividend and buyback efforts [5][7]. Financial Performance Summary - For the first half of 2025, the gross margin decreased by 6.3 percentage points to 61.6%, and the net profit margin fell by 7.6 percentage points to 10.9% due to reduced government subsidies and inventory-related losses [7][8]. - The company plans to distribute at least RMB 2 billion in dividends for 2025 and intends to repurchase up to 10% of its total shares, amounting to at least RMB 1 billion [7][8]. - Revenue projections for 2025-2027 have been adjusted to RMB 199.1 billion, RMB 212.0 billion, and RMB 222.3 billion, reflecting a downward revision of 10%, 7%, and 7% respectively [8][12]. Earnings Forecast and Valuation - The expected earnings per share (EPS) for 2025, 2026, and 2027 are RMB 0.34, RMB 0.40, and RMB 0.46, respectively, with a corresponding price-to-earnings (PE) ratio of 14 times for 2025 [8][12]. - The report highlights that the company, as a leader in the infant formula industry, is expected to improve operational efficiency through enhanced channel management and digitalization efforts [7][8].

Core Viewpoint - The announcement from Feihe has led to a significant decline in its market value, with a projected revenue drop and net profit decrease for the first half of 2025 compared to the previous year [1][4]. Group 1: Financial Performance - Feihe expects revenue for the first half of 2025 to be approximately 9.1 billion to 9.3 billion yuan, down from 10.1 billion yuan in the same period of 2024, representing a decline of about 8% to 10% [1]. - The projected net profit for the first half of 2025 is estimated to be between 1 billion to 1.2 billion yuan, reflecting a year-on-year decrease of approximately 37% to 47% [1]. - Following the announcement, Feihe's stock price plummeted by 17.02% on the next trading day and an additional 3.17% the following day, resulting in a total market value loss of 10.15 billion HKD, equivalent to approximately 9.28 billion yuan [1]. Group 2: Market Dynamics - The decline in birth rates poses a long-term challenge for the infant formula industry, with Feihe's revenue and profit having previously increased in 2024, but now facing a downturn again in 2025 [1][16]. - Feihe has initiated a substantial fertility subsidy program valued at 1.2 billion yuan to attract potential customers, but this strategy may lead to a price war and does not guarantee revenue growth [2][3]. - Competitors such as Yili and Junlebao have also launched similar subsidy programs, which may dilute the effectiveness of Feihe's efforts to capture market share [3]. Group 3: Inventory and Growth Challenges - Feihe's inventory levels have increased significantly, with stock surpassing 2 billion yuan, and inventory turnover days rising from 80 days in 2021 to 113.7 days in 2024 [6][10]. - The management anticipates completing inventory adjustments by the third quarter of 2025, but the impact of the subsidy program on revenue may be more pronounced in the second half of the year [9][10]. - Analysts from various financial institutions have revised their growth expectations for Feihe, with projections indicating a potential revenue growth of only 0.5% for 2025, down from earlier estimates of 9% [5]. Group 4: Product Strategy and Market Trends - Feihe plans to launch higher-end products in the second half of 2025, aligning with market trends that show growth in the ultra-premium segment of the infant formula market [12][11]. - Data indicates that the ultra-high-end market has seen a year-on-year growth of 13.3% in early 2025, while other segments have experienced declines [12]. - Despite these efforts, the performance of new products remains uncertain, and the overall demand for infant formula is declining due to lower birth rates [13][16]. Group 5: Shareholder Returns - Feihe has announced a minimum share buyback plan of 1 billion yuan and a dividend distribution of no less than 2 billion yuan, aiming to enhance shareholder value [14]. - However, despite these positive initiatives, the negative impact of the company's financial performance has overshadowed these efforts, leading to a significant drop in market capitalization [15].