Summary of the Conference Call for Lusi Co., Ltd. Industry Overview - The domestic pet industry is expected to exceed 300 billion yuan by 2024, with a compound annual growth rate (CAGR) of nearly 10% from 2018 to 2024 [9][10] - The pet food segment remains the largest expenditure category, accounting for over 50% of total spending [11] - The pet economy's CAGR from 2018 to 2024 is close to 10%, with the cat economy growing at 14%, significantly outpacing the dog economy [10] Company Overview - Lusi Co., Ltd. operates under a dual domestic and international growth model, with overseas markets serving as the profit foundation while domestic investments are just beginning [2][4] - The company has been in the pet food industry for 20 years, initially focusing on OEM services for European and American brands before developing its own brands [3] Financial Performance - In the first half of 2025, Lusi's overseas business grew by 19% year-on-year, but the Cambodian factory incurred a loss of approximately 7 million yuan due to initial operational inefficiencies [2][7] - The gross margin for staple food products has been increasing, reaching 22%-23% in the first half of 2025, up from 19% in 2024 [7] - The company anticipates a revenue growth rate of 15%-20% for the year, but profit growth is expected to be only 0%-5% due to various challenges [8] Product and Market Strategy - Lusi's product range includes staple foods, jerky, canned goods, and meat powder, with jerky being the largest segment [5] - The company launched a new brand, Miaoguan, focusing on cost-effective products to capture market share [3][18] - The company plans to enhance its production capacity in Cambodia to improve profitability and is also expanding its canned goods production in Shandong [17] Competitive Landscape - The pet food market in China is characterized by low concentration, with the top ten brands holding only 26% market share, compared to 42% in the U.S. [12] - Online sales channels are rapidly growing, with a CAGR of 35% from 2017 to 2024, and domestic brands are gaining a competitive edge [13] Customer and Market Distribution - Lusi's primary customer is Germany's Furins, with a stable European market. The Russian market is growing rapidly, accounting for about 20% of sales, while the U.S. market is just beginning to ramp up [19] Marketing and Brand Development - The company operates an original IP, "Dalu and Sisi," to enhance brand awareness through storytelling, although it has not yet significantly impacted sales [20] Future Outlook - Lusi remains optimistic about its long-term growth potential, focusing on brand development and maintaining a strong relationship with its customers despite short-term profit pressures [21]

Investment Rating - The investment rating for the company is "Accumulate" (maintained) [1] Core Views - The report indicates that the domestic growth rate has slightly slowed down due to the impact of meat powder, while the overseas market is gradually expanding [1] - The company has adjusted its profit forecast for 2025-2027, expecting net profits of 0.80 billion, 0.95 billion, and 1.15 billion respectively, with year-on-year growth rates of 2%, 20%, and 20% [7] Financial Performance Summary - For 2023A, total revenue is projected at 696.31 million, with a year-on-year growth of 26.82% - The net profit attributable to the parent company for 2023A is expected to be 68.40 million, reflecting a year-on-year increase of 58.58% [1] - The earnings per share (EPS) for 2023A is estimated at 0.66 yuan, with a price-to-earnings (P/E) ratio of 35.19 [1] Revenue and Profit Forecast - The total revenue forecast for 2025E is 887.43 million, with a year-on-year growth of 14.12% - The net profit attributable to the parent company for 2025E is projected at 79.73 million, showing a year-on-year increase of 1.75% [1][8] - The EPS for 2025E is expected to be 0.77 yuan, with a P/E ratio of 30.19 [1] Market Data - The closing price of the stock is 23.30 yuan, with a market capitalization of 2,407.04 million [5] - The company has a price-to-book (P/B) ratio of 4.21 and a total asset-liability ratio of 24.05% [6]

Investment Rating - The investment rating for the company is "Accumulate" (maintained) [5] Core Views - The company achieved a year-on-year revenue growth of 11.32% in H1 2025, with total revenue reaching 390 million yuan and a net profit of 30.46 million yuan, reflecting a decline of 12.07% year-on-year [7] - The company’s gross profit margin was 20.9%, down by 1.5 percentage points year-on-year, with a net profit margin of 6.9%, down by 3.2 percentage points year-on-year [7] - The company’s overseas revenue grew by 19% year-on-year, while the domestic market saw a decline in certain product categories, prompting the launch of a new brand to target niche markets [5][7] Financial Performance Summary - In H1 2025, the company’s main grain product revenue increased by 40% to 59.46 million yuan, with a gross margin improvement of 5 percentage points [7] - The company’s revenue from meat jerky products was 220 million yuan, accounting for 57.75% of total revenue, with a gross margin of 23.4% [7] - The company’s revenue from canned products increased by 61.13% to 34.17 million yuan, while revenue from meat powder products decreased by 9.72% to 48.495 million yuan [7] - The company’s projected net profits for 2025-2027 are estimated at 81 million, 98 million, and 120 million yuan respectively, with corresponding P/E ratios of 29.7, 24.6, and 20.0 [8]

Core Viewpoint - The recent initiative by the Alxa League Market Supervision Administration aims to enhance the measurement management of quantitatively packaged goods, protect consumer rights, and regulate the measurement market order through a special supervision inspection in 2025 [1]. Group 1: Supervision Inspection Details - The supervision inspection utilized a random sampling method, focusing on products such as jerky, seeds, daily necessities, and cooking oil, with a total of 33 batches from 10 companies being sampled [3]. - The inspection evaluated two main indicators: compliance of net content labeling with regulations and whether the actual net content met the required standards [3]. - Additionally, checks were conducted on whether businesses were equipped with appropriate measuring instruments, whether these instruments were legally verified, and if measurement records and systems were established [3]. Group 2: Impact and Future Actions - The quantitative packaging inspection has strengthened the measurement and integrity awareness among producers and sellers, thereby better protecting consumer rights [5]. - Moving forward, the Alxa League Market Supervision Administration plans to continue enhancing the measurement regulation of net content in packaged goods, urging companies to improve their measurement management systems and increase legal awareness and management levels [5].

Core Viewpoint - Baima Tea is preparing for an IPO on the Hong Kong Stock Exchange, marking a significant step after multiple unsuccessful attempts to list in A-shares. The company aims to capitalize on the growing trend of new tea beverages among younger consumers [1][15][17]. Company Background - Baima Tea originates from a century-old tea family in Anxi, Fujian, and has expanded to over 3,500 stores, primarily through a franchise model [1][9]. - The company was founded by three brothers, who initially struggled to attract customers until they introduced individually packaged tea bags for convenience [3][5]. Business Model and Revenue - Baima Tea's product offerings include a wide range of tea types, tea utensils, and tea-related snacks, with a significant portion of revenue generated from offline stores, accounting for over 60% of sales [9][10]. - As of September 30, 2024, Baima Tea had opened 3,498 stores, with over 90% being franchise locations [9][10]. Financial Performance - The company reported revenues of RMB 1.818 billion, RMB 2.122 billion, and RMB 1.647 billion for the years 2022, 2023, and the first nine months of 2024, respectively. Net profits for the same periods were RMB 166 million, RMB 206 million, and RMB 208 million, indicating a net profit margin increase from 9.1% to 12.6% [11][12]. - Marketing expenses have raised concerns, as they accounted for approximately 33.9% of revenue in 2022, with total advertising costs exceeding RMB 600 million [12]. Market Context - The tea industry in China is characterized by a predominance of small enterprises, with a lack of standardized quality and branding, which poses challenges for larger companies like Baima Tea [18]. - The recent surge in IPOs for new tea beverage companies highlights a shift in consumer preferences, prompting traditional tea companies to seek listings in Hong Kong as an alternative to A-shares [19][20].