Core Viewpoint - Q3 2023 financial results of Qianhe Flavor Industry show a recovery in revenue and profit, alongside the company's proactive response to new food labeling regulations, emphasizing transparency and consumer health [1][2][6] Financial Performance - Qianhe Flavor Industry reported a revenue of 1.987 billion yuan and a net profit of 260 million yuan for the first three quarters of 2023 [1] - In Q3 alone, the company achieved a revenue of 669 million yuan and a net profit of 86 million yuan [1] - Revenue from soy sauce, vinegar, and other businesses in Q3 was 419 million yuan, 79 million yuan, and 133 million yuan respectively, with a significant reduction in the decline compared to Q2 [1] Market Response and Strategy - The company has removed "0 additives" labeling from its packaging in response to new regulations, placing ingredient lists on the front for better consumer visibility [1][2] - Qianhe's chairman emphasized the importance of product quality and compliance with new labeling standards to avoid consumer misunderstandings [2][6] - The company supports the new GB 7718 regulations, which aim to clarify food labeling and promote consumer awareness of ingredients [2][4] Industry Trends - The clean label concept, which originated in Europe, emphasizes transparency and the rejection of artificial additives, pushing companies towards innovation in natural ingredients and processing methods [4][6] - The new GB/T 18186-2025 standard for soy sauce has raised quality requirements and eliminated substandard products, marking a shift towards pure grain brewing [6][7] - Retailers like Walmart are adjusting their product offerings to focus on high-quality, clean-label soy sauces, indicating a market shift towards cleaner ingredients [7][9] Collaboration and Partnerships - Qianhe Flavor Industry is collaborating with major retailers like Walmart to develop unique product quality standards, enhancing its market position [9] - The company aims to leverage partnerships to promote clean-label products, aligning with consumer demands for food safety and quality [9]

Group 1 - The first clean label certification in China's seasoning industry was awarded to Qianhe Flavor Industry for its products, marking a significant milestone in the sector [1] - The clean label certification, which is the highest level (0 level), requires a comprehensive risk control system from raw material selection to production and packaging, based on EU standards [3] - Qianhe's 0 series soy sauce features a transparent ingredient list on the front of the packaging, addressing consumer concerns about complex ingredients [3] Group 2 - By 2025, a wave of industry reform focusing on "clean labels" and reduced use of food additives is expected in China's food sector, driven by new food safety standards and a dual reduction initiative [3] - Ipsos research indicates that clean label soy sauce will become the preferred choice for Chinese households, with leading brands capturing 50% of the market share [4] - The market share of quality soy sauce in the retail sector is projected to rise to 63.9% over the next three years [4]

Core Viewpoint - Tianwei Foods, known as the "first stock of hot pot base material" in A-shares, has officially submitted its H-share listing application to the Hong Kong Stock Exchange, marking a key step in its internationalization strategy [1][2]. Group 1: Company Overview - Tianwei Foods is a compound seasoning company and is the fourth largest in China by revenue as of 2024, with the fastest revenue growth among the top five compound seasoning companies from 2022 to 2024 [3]. - The company holds the largest market share in recipe-based seasonings at 9.7% and the second largest in hot pot seasonings at 4.8% as of 2024 [3]. Group 2: Financial Performance - The revenue growth of Tianwei Foods has slowed in recent years, with revenue figures of approximately 2.691 billion, 3.149 billion, and 3.476 billion yuan from 2022 to 2024, reflecting year-on-year growth rates of 32.84%, 17.02%, and 10.41% respectively [7]. - Net profit attributable to shareholders for the same period was approximately 342 million, 457 million, and 625 million yuan, with year-on-year growth rates of 85.11%, 33.65%, and 36.77% respectively [7]. - In the first three quarters of this year, the company reported revenue of approximately 2.411 billion yuan, a year-on-year increase of 1.98%, while net profit decreased by 9.3% to approximately 392 million yuan [9]. Group 3: Strategic Initiatives - The funds raised from the H-share listing are intended for brand building and marketing, expanding the distribution network, enhancing supply chain capabilities, and advancing digital operations [3]. - The company aims to strengthen product research and innovation capabilities and explore potential investment and acquisition opportunities that have synergistic effects [3]. Group 4: Market Challenges - Tianwei Foods faces challenges such as sustained profitability, valuation pressure, rising compliance costs, market volatility, and subscription risks associated with the Hong Kong market [4][5]. - The company is also contending with intensified market competition and regulatory environment differences, which may affect its international expansion efforts [5][8].

Core Viewpoint - Q3 performance of Qianhe Flavor Industry shows a decline in revenue and net profit, but the rate of decline has improved compared to the first half of the year [2] Financial Performance - In Q3, Qianhe Flavor Industry reported revenue of approximately 669 million yuan, a year-on-year decrease of 4.3% - Net profit attributable to shareholders was about 86.34 million yuan, down 14.6% year-on-year - Compared to H1, where revenue decreased by 17.07% and net profit by 30.81%, the decline in Q3 shows signs of stabilization [2] Product and Packaging Changes - As of the end of September, the "Qianhe 0" series soy sauce products have undergone packaging optimization and upgrades, with new packaging to be used for future production [3] - The new packaging will prominently display the ingredient list on the front, addressing previous consumer concerns about misleading labeling [6] Market Position and Competition - The chairman of Qianhe Flavor Industry emphasized the trend towards clean and natural ingredients in products, amidst fierce competition in the zero-additive condiment segment [4] - Qianhe's product categories include soy sauce, vinegar, cooking wine, and oyster sauce, with soy sauce being the largest category, accounting for 64% of total revenue [4] Channel Strategy - Qianhe has partnered with major retailers like Walmart and Yonghui to launch customized products, enhancing product quality standards [5] - Walmart has removed products with amino acid nitrogen content below 1.0g/100mL from its shelves, reinforcing quality control in collaboration with Qianhe [5] Industry Comparison - In Q3, competitor Haitian Flavor Industry reported revenue of approximately 6.398 billion yuan, a year-on-year increase of 2.48%, and net profit of about 1.408 billion yuan, up 3.4% - Another competitor, Zhongju High-tech, saw a revenue decline of 22.84% and a net profit drop of 45.66% in the same period [7]

Core Viewpoint - Qianhe Flavor Industry is undergoing a brand renewal and product upgrade following a "zero additive" controversy, with a focus on clean label products and compliance with new industry standards [2][3][5]. Group 1: Company Performance - In the first three quarters, Qianhe Flavor Industry reported a revenue of 1.987 billion yuan, a year-on-year decline of 13.17%, and a net profit of 260 million yuan, down 26.13% [2]. - The chairman acknowledged that the brand's reputation was damaged due to the controversy, estimating a recovery period of 10 to 12 months [2]. - The company began its brand renewal in September, aligning with national regulations and market trends towards clean label products [2][4]. Group 2: Industry Trends - The Chinese soy sauce market is projected to reach 104.1 billion yuan by 2024, shifting from basic demand to quality demand [5]. - The clean label soy sauce market is expected to capture 63.9% of the market share in the next three years, indicating a significant shift in consumer preferences [5][6]. - The introduction of new national standards for soy sauce aims to enhance product quality and safety, phasing out inferior products and promoting pure grain brewing [3][4]. Group 3: Regulatory Environment - New regulations prohibit misleading terms like "zero additives" and provide a two-year transition period for compliance [3]. - The "Soy Sauce Quality Standard" will be implemented by December 2026, emphasizing quality over mere compliance with production metrics [3][4]. - The clean label certification, aligned with EU standards, requires comprehensive risk management throughout the production process, with Qianhe achieving the highest level of certification [6]. Group 4: Future Strategy - Qianhe Flavor Industry plans to focus on four main product categories: soy sauce, vinegar, cooking wine, and oyster sauce, particularly in the clean label segment [6]. - The company is prioritizing international expansion, targeting markets in the US and Europe, while initially focusing on sales rather than production capacity abroad [6].

Core Viewpoint - Qianhe Flavor Industry is upgrading its Qianhe 0 series soy sauce packaging to feature an ingredient list on the front, moving away from the previous "zero additives" label, starting from September 2025 [1] Group 1: Product Changes - The new packaging will display 4 to 5 ingredients used in the production of the soy sauce, including water, non-GMO soybeans, wheat, and edible salt for the 380-day premium light soy sauce [1] - The 180-day premium light soy sauce will include additional ingredients such as white sugar [1] Group 2: Market Availability - As of October 31, the new packaging for the Qianhe 0 series soy sauce is already available for sale on the Qianhe flagship store on Taobao, alongside the old packaging [1] - Qianhe Flavor Industry staff indicated that the new packaging is being gradually rolled out, with offline supermarkets also having switched to the new design [1]

Investment Rating - The investment rating for the company is "Accumulate" [1] Core Views - The company has shown marginal improvement in Q3 performance, with efforts to restore market confidence leading to better operational conditions [5][7] - Revenue for the first three quarters of 2025 was 1.987 billion yuan, a year-on-year decrease of 13.17%, while net profit attributable to shareholders was 260 million yuan, down 26.13% year-on-year [4] - The company is expected to continue its recovery in Q4, with a focus on channel health and product matrix improvement [7] Summary by Sections Revenue Performance - In Q3 2025, the company achieved revenue of 669 million yuan, a year-on-year decline of 4.29%, with net profit of 86 million yuan, down 14.55% year-on-year [4] - The core product categories, soy sauce and vinegar, saw revenue declines of 12.3% and 17.2% respectively in the first three quarters, but the decline narrowed in Q3 to 3.6% and 6.9% [5] Regional Performance - Revenue changes by region in Q3 2025 showed a decline in the East and North regions, while the South and Central regions experienced positive growth [5] Channel Performance - Online revenue decreased by 44.2% in Q3 2025, while offline revenue increased by 3.7%, indicating a recovery in offline channels [6] Cost and Profitability - The gross margin for the first three quarters was 37.4%, an increase of 1.2 percentage points year-on-year, while the net profit margin was 13.1%, down 2.3 percentage points [6] - The company has increased its sales and management expenses due to higher advertising and channel investment [6] Profit Forecast and Valuation - The forecast for net profit attributable to shareholders for 2025 is 408 million yuan, with a corresponding PE ratio of 29x [7][9]

Investment Rating - The investment rating for the company is "Strong Buy" [2][3] Core Views - The company's revenue slightly exceeded expectations, but the structure has dragged down profitability. For the first three quarters of 2025, total revenue reached 2.411 billion yuan, a year-on-year increase of 2.0%, while net profit attributable to shareholders was 392 million yuan, a year-on-year decrease of 9.3% [2][3] - In Q3 2025, total revenue was 1.020 billion yuan, up 13.8% year-on-year, and net profit attributable to shareholders was 211 million yuan, an increase of 8.9% year-on-year. The company has maintained a high net profit margin despite slight declines due to increased sales expenses [2][3][6] Financial Summary - **Revenue Forecasts**: - 2024A: 3,476 million yuan - 2025E: 3,571 million yuan - 2026E: 3,872 million yuan - 2027E: 4,164 million yuan - Year-on-year growth rates are projected at 10.4%, 2.7%, 8.4%, and 7.5% respectively [2][6] - **Net Profit Forecasts**: - 2024A: 625 million yuan - 2025E: 601 million yuan - 2026E: 677 million yuan - 2027E: 746 million yuan - Year-on-year growth rates are projected at 36.8%, -3.8%, 12.6%, and 10.2% respectively [2][6] - **Earnings Per Share (EPS)**: - 2024A: 0.59 yuan - 2025E: 0.56 yuan - 2026E: 0.64 yuan - 2027E: 0.70 yuan [2][6] - **Valuation Ratios**: - Price-to-Earnings (P/E) ratio for 2025E is 20 times, and for 2026E is 18 times [2][6] Market Performance - The company has shown a revenue increase in Q3 2025, with specific product lines such as hot pot base and recipe-style condiments growing by 24.96% and 14.95% year-on-year respectively. Online sales channels have seen a significant increase of 60.56% year-on-year [2][6][7] - The company has a total market capitalization of 12.152 billion yuan, with a total share capital of approximately 106.5 million shares [3][6]

Investment Rating - The report maintains a "Buy" rating for the company [10]. Core Views - The company's total revenue for Q1 to Q3 of 2025 was 3.156 billion yuan, a year-on-year decrease of 20.01%. The net profit attributable to shareholders was 380 million yuan, down 34.07% year-on-year [2][5]. - The revenue for Q3 2025 alone was 1.025 billion yuan, reflecting a year-on-year decline of 22.84%, with a net profit of 123 million yuan, down 45.66% year-on-year [2][5]. - The decline in revenue is attributed to channel adjustments and the company's focus on optimizing distributor inventory, which has impacted sales negatively [6][8]. Summary by Sections Revenue Breakdown - Revenue by product for Q1 to Q3 2025: Soy sauce 1.896 billion yuan (down 17.5% year-on-year), chicken essence and powder 393 million yuan (down 22.76%), edible oil 198 million yuan (down 42.67%), and others 465 million yuan (down 4.9%) [6]. - Revenue by region: Eastern region 649 million yuan (down 28.21%), Southern region 1.227 billion yuan (down 17.48%), Central and Western region 643 million yuan (down 14.68%), and Northern region 433 million yuan (down 12.78%) [6]. Profitability Analysis - The net profit margin for Q1 to Q3 2025 decreased by 2.57 percentage points to 12.04%, while the gross margin increased by 1.84 percentage points to 39.21%. The expense ratio rose by 6.33 percentage points to 25.72% [7]. - For Q3 2025, the net profit margin fell by 5.05 percentage points to 12.01%, with a gross margin of 39.53% (up 0.71 percentage points) and an expense ratio of 26.9% (up 10.75 percentage points) [7]. Future Outlook - The company is undergoing a painful period of channel adjustments, with short-term revenue pressure. However, with the new board of directors in place since July 2025, governance is being adjusted, and a turnaround is anticipated [8]. - As inventory is gradually digested and the pricing system is streamlined, along with ongoing efforts in the catering channel, compound seasonings, and overseas markets, growth momentum is expected to gradually release in the medium to long term [8]. - EPS estimates for 2025 and 2026 are approximately 0.70 yuan and 0.91 yuan, respectively, corresponding to PE valuations of 26 and 20 times [8].

Core Insights - The event "2025 Qianhe Flavor Industry Product Renewal and Clean Label Product Level 0 Certification Launch" was held in Meishan, Sichuan, where Qianhe's 0 series soy sauce received the first Clean Label Product Level 0 certification in China's condiment industry, using only 4 to 5 clean ingredients [1] - The Chinese soy sauce market is projected to reach 104.1 billion yuan in 2024, with a shift from basic to quality demand, and clean ingredient soy sauce expected to dominate household purchases, capturing 63.9% of the premium soy sauce market by 2026 [2] - The new national standard for soy sauce, effective December 1, 2026, emphasizes quality over additives, reflecting a market demand for healthier and safer food options [2] Company Insights - Qianhe Flavor Industry has pioneered the implementation of the new national standards for pre-packaged food and the "dual reduction" initiative for additives, enhancing transparency in ingredient labeling [1] - The company has achieved large-scale production of clean ingredient soy sauce, which does not rely on external additives for flavor enhancement, positioning itself as a healthier alternative [2] - Qianhe's Clean Label Product Level 0 certification indicates a commitment to high standards in food safety and quality, aligning with international benchmarks [3] Industry Insights - The clean label certification standard, derived from the EU, requires a comprehensive risk management system from raw material selection to packaging, with Level 0 being the highest certification [3] - The shift towards clean ingredient soy sauce reflects a broader trend in the condiment industry towards quality competition and consumer safety demands, driven by policy guidance and changing consumer awareness [3]