Summary of Li Ziyuan's Conference Call Company Overview - **Company**: Li Ziyuan - **Industry**: Food and Beverage Key Points Financial Performance - In the first three quarters of 2025, Li Ziyuan's other business revenue reached approximately 80 million yuan, showing rapid growth and indicating initial success in product diversification [2][5] - The overall gross margin has been rising in 2025, but there was a 2.5 percentage point decline in Q3 due to revenue drop affecting scale effects [2][7] Product Development and Market Strategy - The vitamin water product line has not met expectations, but the company is committed to developing it as a second growth curve, focusing on systematic R&D and sales [2][4] - The classic product "Sweet Milk" faced revenue pressure in Q3, attributed to a broader decline in the consumer goods industry, but the company remains optimistic about its potential [3][4] E-commerce and Sales Channels - E-commerce channels have performed well due to new management's focus, key talent recruitment, and product differentiation strategies [2][9] - The snack wholesale channel is rapidly growing, with a dedicated department established to manage it, and customized products launched to support 2025 performance [2][11] Internal Improvements and Operational Efficiency - The company sees significant internal improvement opportunities, particularly in decision support and policy alignment to better respond to external changes [2][6] - Distributor profit margins are stable, and actions have been taken to control unauthorized sales [2][12] Future Projects and Investments - The new wooden project aims to self-supply milk powder to control costs and expand B-end business, with completion and production expected in early 2026 [2][8] - Convertible bond funds are allocated for working capital and infrastructure investments, with no plans to adjust the bond price [2][14] Market Trends and Consumer Preferences - The company is aware of varying consumer preferences across different markets, which influences new product development strategies [2][13] - The focus will be on developing new products with market-moving capabilities while considering regional consumption habits [2][13] Dividend Policy Outlook - The company aims to provide stable and slightly growing returns to investors, with dividends being prioritized unless significant investment plans arise [2][10] 2025 and 2026 Outlook - For Q4 2025, the company plans to correct previous shortcomings in channel development, expense allocation, and new product strategies, expecting overall improvement in 2026 [2][15]

Summary of Li Ziyuan's Conference Call Company Overview - **Company**: Li Ziyuan - **Industry**: Dairy and Beverage Key Points and Arguments Financial Performance - **Q1 2025 Revenue**: Slight decline due to market weakness and transitional adjustments in channels, but profit increased by 16.7% year-on-year, indicating strong profitability [2][3] - **2024 Performance**: Revenue remained stable with no decline, supported by measures to maintain positive growth, although traditional distribution channels faced a downturn [3] - **Gross Margin**: Improved by approximately three percentage points due to sufficient raw material reserves [3] Strategic Focus - **Management Changes**: New management under the founder's son, focusing on brand building and sales market management, with a shift towards emerging channels like dining, breakfast, and e-commerce [5] - **Cost Control**: Effective cost management through raw material reserves, particularly in milk powder, expected to improve costs in 2025 compared to 2024 [2][7] Product Development - **New Product Launches**: Focus on youth-oriented and health-focused products, including nutrient water with a sales target of 100 million yuan [2][6] - **E-commerce Growth**: E-commerce business nearly doubled in 2024, with a projected growth of 30%-40% in 2025, focusing on sweet milk and new product lines [4][13] Supply Chain and Production - **Investment in Production**: Plans to build a spray-drying plant in Yinchuan, Ningxia, to enhance upstream supply chain and ensure quality and cost control [2][9] - **Raw Material Cost Structure**: Milk powder constitutes about 65% of cost structure, with packaging components at 45%-50% [7] Market Dynamics - **Channel Performance**: Traditional channels, especially supermarkets, are declining, while e-commerce and snack channels show significant growth [11][13] - **Regional Performance**: Variability in performance across regions, with notable declines in East China, particularly in Zhejiang and Hubei [11][12] Future Outlook - **Dividend Policy**: High dividend payout ratio expected to be maintained at 70%-80% due to stable income and cash flow [4][10] - **Sales Expense Management**: Anticipated reduction in sales expenses due to decreased advertising costs, with overall expenses expected to decline [22][23] - **Market Confidence**: Company expresses confidence in future performance recovery and new product growth despite current challenges [24] Additional Insights - **Consumer Demographics**: Differences in consumer demographics between sweet milk and nutrient water may affect market acceptance, but targeted marketing strategies are in place to address this [19] - **Nutritional Focus**: Emphasis on health and nutrition in product offerings aligns with increasing consumer demand for healthy options [20] This summary encapsulates the key insights from Li Ziyuan's conference call, highlighting the company's financial performance, strategic initiatives, product development, and market dynamics.